Despite extreme heat and parched conditions in the Corn Belt, the Great Plains, and the Southwest, farm income is expected to hit a record high. So are land values. —The Editors

NATIONAL — TREND
The USDA forecasts that despite severe drought conditions and higher feed costs, net farm income should exceed $122 billion. Net cash income is forecast to exceed $139 billion. Both amounts are nominal records. Price-led gains in corn and soybean receipts are one reason. Crop insurance indemnities also play a big part.
MIDWEST — FOCUS
This surge in farm income and expenses will manifest itself in many ways such as higher food costs to consumers. Higher land values for productive farms are another byproduct, and this is already being seen.
In the Midwest, home of the Corn Belt, farmland prices continue to climb. Much of this region is covered by the Seventh Federal Reserve District, which surveys agricultural bankers and produces a regular rundown on farmland values and credit conditions called AgLetter.
The August 2012 edition of the Chicago Fed’s AgLetter reports that despite scorching heat and diminished yields, strong gains in The Hawkeye State continued to bolster Midwest agricultural land values. District-wide gains averaged 15 percent for the yearlong period ending July 1.
Iowa’s 24 percent gain in dollar value of “good” farmland led the Seventh District, which also includes portions of Illinois (15 percent), Wisconsin (13 percent), and Indiana (12 percent).
For a copy of the complete AgLetter, go to www.ChicagoFed.org.