Land values are not falling off a cliff in Kansas. “Instead, it will more likely be a slow, steady decline that appears to be in line with negative profitability in the cropping sector,” says Mykel Taylor, ag economist at Kansas State University.
Kansas farmland values last year slipped nearly 4% from 2016. The per-acre average was $1,970 in 2017, according to USDA. Irrigated farmland values have dropped 13% from 2014, which was the high-water mark. In 2017, irrigated farmland averaged $2,850. Non-irrigated farmland has dropped 13% from its highest value in 2014 to average $1,870 in 2017. Meanwhile, pastureland has dropped nearly 8% from its high in 2015 to average $1,280 last year.
Taylor and her team crunched recent sales data from the Kansas Property Valuation Department and put it through several filters to estimate county-level market-based land values. The sales transactions show similar trends, but with more evident declines. Because land values peaked in 2015, irrigated land has dropped 17%, non-irrigated land is down 19% and pastureland is down 21%.
Use the slide in the middle of the map to compare 2016 farmland values in Kansas to 2017 farmland values.
The annual declines in land values fit tightly with the four years of negative profitability for Kansas farmers, Taylor says. This is pushing some farmers into the red. In 2017, 25 Kansas farmers filed for bankruptcy, which compares to 21 in 2016 and four in 2015. In 1987, 265 Kansas farmers filed for bankruptcy.
Which farms are most susceptible to bankruptcy? Farmers who aggressively grew their operations from 2008 to 2013 and young farmers who tend to be more highly leveraged.
Landowners understand the precarious financial standing of farmers, Taylor says, and look at rental rates every year. “We’ve been in the habit of negotiating and fixing a rental rate for three or four years,” she says. “That will get us in trouble really quickly. We need to talk to each other and share some numbers.”
The number of farmland sales have dropped 31% in the past four years. In 2017, 2,625 sales were recorded, which is up slightly from 2016 but down significantly from 2015 and 2014. In 2014 3,789 farms were sold in Kansas.
Anecdotally, Taylor says she’s heard of farmers who are putting some land up for sale to reduce their borrowed money levels. “We’ve seen a decrease in high-quality land being sold and a slight increase in lower-quality land being sold,” she says. “If farmers are asked by their bankers to sell ground, they are looking at their lowest quality land to sell first.”
Looking forward, farmland values will stay on their downward trajectory. “As long as profitability numbers stay low, we’re looking at another three to five years of farmland values correcting,” Taylor says.
Learn more: 2017 Kansas County-Level Land Values
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