Federal Reserve Reports Rapid Rise in Land Values and Farm Income!

Published on: 08:52AM Feb 16, 2011

The Federal Reserve of Kansas City on Tuesday reported that farm land values in their district had risen substantially from the previous year.  The year-over-year rise for non-irrigated land were as follows:

  • Kansas            19.5%
  • Missouri          6.6%
  • Nebraska       17.6%
  • Oklahoma        5.0%
 
The overall value for their district was a 14.8 percent rise for non-irrigated crop land and 12.9 percent for irrigated.  Rising farm income, especially for crop farmers, drove the prices up almost 20% in Kansas and Nebraska.
 
Although farmland prices are up sharply, cash rents increased an average of 6% for crop land and 4% for ranch land.
 
Farm real estate loan-to-value ratios ranged from 50% to 90% with an average of 70%.  Many bankers are now putting a cap on a set dollar per acre that they will loan on.  For example, if the appraised value is $7,500 per acre, the bank may only allow an use of $5,000 per acre to loan against.  This will normally require more of a cash investment by the farmer.
 
The farm income index soared in the fourth quarter approaching the highs set in 2008.  I saw another article where the USDA is perdicting net farm income for 2011 of about $98 billion .  It would not surprise me that we will go over $100 billion with the continued strong farm commodity prices across the board.
keyword: