Survey shows soaring farmland values, farm income

Kansas City-Driven by strong demand from farmers and investors, farmland values in the Federal Reserve’s 10th District continued to climb in the fourth quarter and are rising at their fastest rates since the spike that occurred in 2007/08, the Federal Reserve Bank of Kansas City reported on Feb. 15. Across the entire district ?Çô which covers Kansas, Nebraska, Oklahoma, Wyoming, Colorado, northern New Mexico, and western Missouri ?Çô irrigated land increased 15 percent on average during the fourth quarter, with dryland values up 13 percent and ranchland up 9 percent from the previous year. The biggest increases came in Kansas, where dryland areas jumped nearly 20 percent, irrigated land increased 18 percent, and ranchland increased 14 percent. Nebraska saw similar increases, with irrigated and dryland values jumping 18 percent and ranchland increasing 13 percent from the previous year. The quarterly survey showed farmland values increasing for the fifth consecutive quarter since a drop in the third quarter of 2009. Brian Briggeman, an economist at the Federal Reserve Bank of Kansas City, said some survey respondents reported record sales prices, and around half expected cropland values would rise further in the coming months. “Survey respondents reported that farmers used a portion of their elevated income to prepay for next year’s crop inputs,” Briggeman noted. “District bankers also noted increased use of vendor credit to finance seed, fertilizer, and equipment purchases. However, survey respondents expected loan demand would pick up before spring planting.” One issue of concern in the Feb. 15 report, however, is that cash rent rates for cropland across the district rose only about 6 percent in the fourth quarter, which economists say is too little to justify the big spike in land prices. “Bankers in the survey were starting to raise questions about the sustainability of farmland values,” Briggeman said, and “paying closer attention to their loan-to-value ratios.” Quarterly surveys by the Federal Reserve Banks in Chicago and Minneapolis have yet to be released.