U.S. Plains’ 4Q Farm Values Jump 25%; Absentee Landlords Sell

U.S. Plains’ 4Q Farm Values Jump 25%; Absentee Landlords Sell

Farmland values in the heart of the U.S. Plains continued to soar at the end of 2011 as absentee landowners increasingly put their farms up for sale, the Federal Reserve Bank of Kansas City said.

Farmland values in the region, which includes Kansas, Nebraska, Oklahoma and Colorado, were up 25% in the fourth quarter from a year ago, and climbed 9% during the quarter.

Farmers were the main buyers, but outside investor interest in farmland for rental income or capital gains remained high, the Kansas City Fed said. It added that absentee landowners putting their farms up for sale were turning to land auctions as they sought “top-dollar prices.”

Historically, high crop and livestock prices, which have resulted in strong farmer incomes, have driven the farmland boom across the U.S. over the past year.

The gains came despite a severe drought that plagued much of the region, particularly Kansas and Oklahoma, in 2011. The Kansas City Fed noted that farmers’ incomes were volatile due to the drought, and that the drought limited gains in farmland values for nonirrigated land in Oklahoma while driving up the value of irrigated land.

Farmland values increased most sharply in Nebraska, where non-irrigated values jumped 37.8% from a year ago.

About one-third of bankers in the district expect farmland prices to increase further in 2012, along with the number of sales, the Kansas City Fed said.

The stronger farm income improved farm credit conditions generally in the fourth quarter, with the Kansas City Fed noting better loan repayments and fewer loan renewals or extensions.

Farmland values have also soared elsewhere in the U.S. heartland, including in top corn-producing states such as Iowa and Illinois. The rapid gains have prompted some concerns about a potential bubble, but many economists said that a crash in prices is unlikely as crop prices are high and farmers don’t have nearly as much debt as they had in the 1980s, when a farmland bubble popped.