Central, Southern Plains Post Strong Annual Gains in Farmland Values

Published on: 10:44AM Aug 15, 2013

Mike Walsten

Farmland values in the Central and Southern Plains continue to post sharp annual gains, according to the Federal Reserve Bank of Kansas City. In its latest survey of agricultural bankers in Colorado, Kansas, western Missouri, Nebraska, northern New Mexico, Oklahoma and Wyoming, the value of nonirrigated cropland rose 18.3% through the second quarter of 2013 while the value of irrigated cropland surged 25.2%. Ranchland values also jumped, up 14.4% versus a year earlier.

Leading gains was western Missouri which saw the value of nonirrigated cropland boomed 25.8%. Kansas follows with an increase of 22.2% followed by gains of 14.9% for Nebraska, 14% for the Mountain States of Colorado, northern New Mexico and Wyoming and a 10% rise for Oklahoma. The strongest percentage increases were reserved for irrigated cropland values. The Mountain States report an annual increase of 33.2% followed by Kansas with a 29.9% gain, Nebraska, 22.6% and Oklahoma with a 19.3% increase.

In its report, the bank says: "The expectation of weaker farm income, however, does not appear to be a main factor underpinning farmland values. In ranking factors that contribute to farmland values, more district bankers pointed to the overall wealth level of the farm sector, the current low interest rate environment and a lack of alternative investment options. Fewer bankers cited farm income expectations as a primary driver. Land-lease revenue from mineral rights was noted as a lesser factor and, while real-estate tax policies may influence the timing of farmland sales, they were not seen as a major contributor to farmland values."

"While most bankers expected farmland values to remain at current levels, an increasing number of respondents felt farmland values may have peaked," the bank states. "Compared with previous surveys, fewer bankers expected farmland values to keep rising. More bankers also expected farmland values to drop after harvest likely due, at least partially, to expectations of lower farm income. Among bankers anticipating a decline, though, a majority estimated farmland values would fall less than 10% during the next year. Very few bankers expected that farmland prices would drop more than 10%."

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