Strengthening commodity prices, low interest rates and recent large infusions of government payments supporting net farm incomes may lead to stronger land values in 2021.
This is just one possibility discussed in the third edition of the Kansas Agricultural Land Values and Trends, released this week with sales data from 2015 to 2020. The publication is a joint venture between the Kansas Society of Professional Farm Managers and Rural Appraisers and the Kansas State University Agricultural Economics Department.
Robin Reid, K-State Department of Ag Economics Extension associate, and Allen Featherstone, K-State department head of ag economics, write that 2020 will be known as a year of “disrupted marketing chains, large government emergency payments and an unanticipated but very welcome run-up in commodity prices.”
While soybeans and corn cash prices decreased as the pandemic began in March, they rallied by August and ended the year at levels not seen in six years. In 2020, net farm income was buoyed by Marketing Facilitation Payments and Coronavirus Food Assistance Program payments. Reid and Featherstone predict that if strong commodity prices continue in 2021, net farm income in Kansas will manage the gap from the loss of government payments.
Despite a downturn in the farm economy in the last five years, Kansas land values have remained resilient.
“While a pullback in values since 2014 is seen statewide, one can argue the steep growth curve that occurred prior may have overinflated land values,” Reid and Featherstone write. “Continuing on a near 5% annual growth curve would bring land values back to a historically ‘normal’ growth rate.”
The report shows at the state level, agricultural land sales totaled 420,578 acres in 2020, which is 6.7% greater than the 2015-19 average. The southwest region contributed the most to state sales volume, while the northeast region tended to have the highest prices per acre and yet the smallest sales volume, the report states.
Nonirrigated cropland makes up the majority of Kansas agricultural land. Compared to the five-year average, the report states that the value of nonirrigated cropland decreased 3.9%.
Irrigated cropland saw its peak prices in 2015, but in the six years since, values have been highly variable, the report states. Meanwhile, pasture and hay ground value continues to hold steady from its peak in 2015.
As always, consult a local land professional when making buy-sell decisions. To read the full report, visit the Kansas Land Values Book 2020 webpage at the K-State website.