If You Think Homes Are Getting Expensive, Try Buying Kansas Farmland KCUR 89.3
WICHITA, Kansas – Soaring prices define the land market in the agricultural country of Kansas.
The value of farm real estate and cropland in Kansas has jumped more than 10% this year from a year ago. This is good news and bad news for the Kansas agribusiness industry, largely depending on whether a farm already has land or needs more acres.
“This has made it more difficult for farmers not only to expand but also to enter these new farmers,” said Mark Nelson, director of commodities for the Kansas Farm Bureau.
Agricultural real estate is the value of all land and houses, barns and machine sheds on a farm. In Kansas, it rose to about $ 2,100 an acre, up 11% from 2020.
The value of cultivated land has jumped even higher. It rose 14% to almost $ 2,400 an acre.
That’s a higher percentage increase than any of its neighbors. Missouri cropland values increased 7.9%, Oklahoma 7.1% and Colorado 1.6%. Close to Nebraska, the value of cropland rose 13.8% to nearly $ 5,000 an acre, which is considerably more expensive per acre than Kansas cropland.
Nelson said the increase may be good news for some farmers. The increase in the value of real estate and cultivated land inflates a farmer’s assets. This is an important measure when a farmer needs to obtain a loan from a bank. It also means more profit if someone decides to sell the land.
But the increase in the value of land also comes with a number of disadvantages.
Nelson said that increasing the value of land could attract more non-farm investors interested in the land, increasing demand and potentially pushing prices even higher. It also makes it harder for a farmer looking to expand or a recent college graduate looking to get started.
The increase in the value of cropland this year will also mean an increase in the price someone will pay to rent cropland in a few years. Multi-year leases generally delay the time it takes to increase rents.
“Often times, if it’s a new farmer or a young farmer in the family, they can get a reduced rental rate to help them get established,” said Doug Bounds, state statistician for the US Department of Agriculture.
Higher land values may not have an immediate impact on a farmer’s annual expenses, but higher rents will, especially since the majority of farmers lease at least some of the land on which they cultivate. .
“It’s just more pressure that’s going to tighten margins and increase those breakeven points as producers move into 2022,” Nelson said.
He said farmers are also worried about the general price inflation of common and specialty agricultural products. The COVID-19 pandemic is still disrupting supply chains for everything from tractor tires to fertilizer. Nelson said in particular that he expects the price of fertilizer to be double the price in 2022 compared to 2020.
So even if farmers get good crop yields and grain prices remain high, additional land and food costs are likely to wipe out any gain.
“Their equilibrium costs are climbing very close to where they are,” said Nelson. “So 2022 could be a tough year for some people. ”
Brian Grimmett reports on the environment, energy and natural resources for KMUW in Wichita and the Kansas News Service. You can follow him on Twitter @briangrimmett or email him at grimmett (at) kmuw (dot) org.
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