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Kansas Agricultural Land ValuesMykel Taylor, Asst. Professor
Dept. of Agricultural Economics
Kansas State University
April 26, 2017 [email protected]
Webinar sponsored by: Porter Cattle Company of Reading, KS
Current Economic Conditions
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Returns to Farming
Source: KFMA Enterprise Reports (http://www.agmanager.info/kfma)
Returns to Farming
Source: KFMA Enterprise Reports (http://www.agmanager.info/kfma)
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Returns to Farming
Source: KFMA Enterprise Reports (http://www.agmanager.info/kfma)
‐150
‐100
‐50
0
50
100
150Returns over Total C
osts ($/ac)
NC KFMA Enterprise Analysis
Wheat Corn
Grain Sorghum Soybeans
Net Farm and Ranch Income
$(20,000)
$30,000
$80,000
$130,000
$180,000
$230,000
Returns over Total C
osts ($/ac)
Net Income Per Operator
Dryland Crop
Cowherd
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Net Farm Income
$0
$20
$40
$60
$80
$100
$120
$140
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
USD
A Net Farm In
come Billions of $
Kansas Aggregate U.S.
Land Value Trends
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Land ValuesAffected by profitability in ag sector
But land values do not adjust as quickly as profitability to changes in commodity prices
Adjustment period due to◦ Long‐run reason for buying and holding land
◦ Expectations of buyers/sellers
Land ValuesWhere do we get information on land values?
KS Ag Stats Service◦ Annual survey series
◦ Dropped CRD‐level estimates in 2013
◦ Only have a state value for irrigated, non‐irrigated, and pasture land in Kansas
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2016 Cropland Values
2016 Pasture Land Values
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Kansas Land Values
‐9.8%
Source: USDA‐NASS
‐8.3%
‐7.2%
Rent‐to‐Land Value Ratio
Source: USDA‐NASS
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Kansas Land ValuesPotential problems with these data◦ Surveys ask for an opinion (read: best guess)
◦ NOT a market‐based estimate
◦ Don’t know the spread, only the average
◦ Kansas’ response rate is relatively low
Can we add to the available information and improve our estimates of land value trends?
Market‐Based Land Values
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Kansas Land ValuesSource for market transaction data◦ Property Valuation Department, Topeka
2014‐16 sales data◦ County location, population density◦ Acres in sale◦ Mixture of irrigated, non‐irrigated and pasture in parcel◦ 20‐year average rainfall and water‐holding capacity◦ Enrollment in CRP◦ Value of improvements is removed for bare land value◦ Parcels under 40 acres are omitted◦ Johnson and Wyandotte County parcels removed
PVD Sales Data 2014‐20162016 Average
Acres in Sale 155.8
CRP Contracts 4.5%
Sales Per County 24.7
All Years
Total Sales Transactions: 6,845
2016 2,117
2015 2,502
2014 2,333
18% drop in sales
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Model‐Predicted Sales Price ($/ac)
Land Type 2016 2015 2014
Non‐Irrigated 2,398 2,897 2,835
Irrigated 4,896 5,540 5,444
Pasture 1,726 1,871 1,684
All Cropland and Pasture $3,027 $3,378 $3,321
10.4% decline from 2015
Land Model Results
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Land Model Results
17% decline
Land Model Results
12% decline
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Land Model Results
8% decline
$1,776
$1,766
$1,210
$2,530
$2,301
$1,969
$4,353
$3,130
$2,551
2016 Non‐Irrigated Land Values
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$1,278
$1,271
$871
$1,821
$1,656
$1,417
$3,133
$2,253
$1,836
2016 Pasture Land Values
$5,609
$5,117
$3,368
‐‐‐
‐‐‐
$5,491
‐‐‐
‐‐‐
‐‐‐
2016 Irrigated Land Values
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Long‐Run Growth
Projected Income Per Crop Acre
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$0
$2
$4
$6
$8
$10
$12
$14
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Income per Acre
Corn and Soybean Prices per Bushel
Corn Soybean Income
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Land Value ImpactsThe long‐run multiplier is 21.71 or an implied capitalization rate of 4.61%◦ Long‐run elasticity is 96.9%
At a net farm income per acre of $46, the projected long‐run Kansas (real) land price is $999, a decline of about 50%
Kansas Land Values
Red (1962‐2016)Green (1962‐2009)Purple (1962‐2003) 31.6%
decline
47.6% decline
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Your Observations…
Your ObservationsResponses to the survey from Monday◦ 114 people responded
◦ Majority of values for Kansas (other states: 6)
Reponses by occupation◦ Lender: 34%
◦ Farmer/Rancher: 32%
◦ Other: 33%
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Your ObservationsKS Region Lender Farmer/Rancher Other
NE ‐11% ‐7% ‐4%
SE ‐5% 0% 0%
NC ‐10% ‐6% ‐5%
SC ‐9% ‐3% ‐7%
NW ‐20% ‐6% ‐16%
SW ‐13% ‐9% ‐14%
Average ‐11.3% ‐5.2% ‐7.7%
Summary
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SummaryLand values have decreased since market high in 2015◦ Non‐irrigated cropland: ‐17%
◦ Irrigated cropland: ‐12%
◦ Pasture: ‐8%
Long‐run trends indicate downward movement will continue into 2017 and possibly beyond◦ Up to a 50% decline from highest value
Other CommentsAppraiser in Central Kansas◦ “Attended 3 auctions in past 5 weeks. There only 12 people at one of them. At another, there were over 100 people, but only 3 bidders.”
Farmers are the biggest buyers of farmland◦ When farmers are reluctant to buy, demand falls and isn’t likely to be sufficiently supported by outside investment
◦ Turnaround will happen when projections for net farm income rebound
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Online Resources2016 Kansas County‐Level Ag Land Values◦ www.agmanager.info/land‐leasing/land‐buying‐valuing
2017 Rent Estimates: Non‐Irr. & Irrigated Cropland◦ www.agmanager.info/land‐leasing/land‐rental‐rates
Pasture Rental Rate Tool◦ www.agmanager.info/land‐leasing/land‐rental‐rates/pasture‐rental‐rate‐decision‐tool
Kansas Agricultural Land ValuesMykel Taylor, Asst. Professor
Dept. of Agricultural Economics
Kansas State University
April 26, 2017 [email protected]
Webinar sponsored by: Porter Cattle Company of Reading, KS