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Reports Say Rapid Rise in Land Values and Farm Income

I found this article very informative regarding farm and land values.
It was written by Paul Neiffer, The Farm CPA
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:

ï    Kansas            19.5%
ï    Missouri            6.6%
ï    Nebraska        17.6%
ï    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.