Tuesday, February 15, 2011

Farmland Value Report from Kansas City Tenth Federal Reserve District for Fourth Quarter 2010

There were no surprises in this Tenth Federal Reserve District report on farmland prices and credit conditions – an area that includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico, and the western third of Missouri. Below, I excerpted a few charts and words from the report. All appears to be rosy in the Tenth District.

Burgeoning farm profits accelerated District cropland and ranchland value gains, particularly in Kansas and Nebraska. Cropland values posted double-digit gains from year-ago levels, and ranchland values recorded their sharpest increase in two years. Cash rental rates, however, rose more modestly. In fact, some District bankers expressed concern that current rental income may not sustain lofty land values, and they were looking closely at loan-to-value ratios. Still, many survey respondents felt that farm income and farmland values would rise further in the coming months.

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Farmland values also strengthened with higher land lease revenues from expanded oil and gas activity, especially in Oklahoma and Wyoming.

More bankers reported lower operating loan demand and commented that many farmers used cash or vendor credit to pay for crop inputs and farm equipment. Survey respondents also noted an uptick in farm real estate cash transactions and a rise in real estate lending by the Farm Credit System.

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Loan repayment rates rose further, and the number of loan renewals and extensions fell for the fourth straight quarter.

“Our bank has been limiting land loans to about $2,500/acre regardless of price or appraised value.”
---Eastern Nebraska

“The rapid appreciation in land values is concerning.”
---Northwest Kansas

For the full report go here.