Despite the prospect for lower farm income, there is still strong farm income and that will continue to fuel the demand for farmland, say ag economists Jason Henderson and Maria Akers of the Kansas City Fed District. They also saw higher land values in the first quarter of 2012, which has risen by 20% for two consecutive years. In the Kansas City Fed District, first quarter land values were up 16% compared to a year earlier and one third of the bankers surveyed report the upward trend will continue over the next few months.
However, some of the increases within states are phenomenal. Compared to year ago levels, irrigated farmland in Nebraska is up more than 40%, with a 38% rise in non-irrigated land. Kansas farmland is selling for 24-26% more. The Kansas City Fed economists expect the trend to continue based on reports from 235 local bankers. They report, “Despite larger supplies, buyers remained willing to pay record prices at land auctions. Furthermore, survey respondents did not expect the farmland market to cool in the near future. About a third of District bankers anticipated farmland values would rise further while the remaining respondents expected farmland values to hold at peak levels.”
Through the heart of the Cornbelt the demand for land remains at a high level, and farmers are willing to pay an average of 20% more than they did a year ago. Commercial bankers, surveyed by the Chicago and Kansas City Federal Reserve banks, indicate strong farm income has allowed farmers to repay debt and invest in farmland at record high prices. Commercial lenders expected the trend to continue, based on recent land sales, the good farm economy, and the fact that more land is available to the market than in the past.
Source: FarmGate blog