Current Economic Conditions

Transcription

1 Kansas Land Values and Rental Rates Mykel Taylor Associate Professor K State Dept. of Agricultural Economics mtaylor@ksu.edu Current Economic Conditions

2 Returns to Farming Source: KFMA Enterprise Reports ( Returns to Farming Source: KFMA Enterprise Reports (

3 Returns to Farming Returns over Total Costs ($/ac) 150 Wheat Corn Grain Sorghum Soybeans NC KFMA Enterprise Analysis 150 Source: KFMA Enterprise Reports ( Returns to Farming Returns over Total Costs ($/ac) 150 Wheat Corn Grain Sorghum Soybeans NC KFMA Enterprise Analysis 150 Source: KFMA Enterprise Reports (

4 Returns to Farming Source: KFMA Enterprise Reports ( Net Farm and Ranch Income Net Farm Income Per Operator $180,000 Returns over Total Costs $130,000 $80,000 $30,000 $(20,000)

5 Average Net Farm Income Distribution of NFI 31% of farms

6 Farm Family Living Expenses $80,000 Total Family Living Expenses $68,095 annual $60,000 $40,000 $20,000 Bankruptcies Filed by KS Farms No. of Bankruptcies Filed

7 300 Bankruptcies Filed by KS Farms 265 KS Chapter 12 Bankruptcies Land Value Trends

8 Land Values Affected by profitability in ag sector But land values do not adjust as quickly as profitability to changes in commodity prices Adjustment period due to Long run reasons for buying and holding land Expectations of buyers/sellers Land Values Where do we get information on land values? KS Ag Stats Service Annual survey series Dropped CRD level estimates in 2013 Only have a state value for irrigated, non irrigated, and pasture land in Kansas

9 2017 Cropland Values 2017 Pasture Land Values

10 Kansas Land Values $/acre $3,500 $3,000 $2,500 $2,000 $1,500 Irrigated Non irrigated Pasture $2,900 $1,910 $1,280 $1,000 $500 $ Source: USDA NASS Rent to Land Value Ratio 7.0% 6.0% 5.0% 4.5% Rent to Value 4.0% 3.0% 3.0% 2.0% 1.5% Irrigated 1.0% Non irrigated Pasture 0.0% Source: USDA NASS

11 Market Based Land Values Kansas Land Values Source for market transaction data Property Valuation Department, Topeka sales data County location, population density Acres in sale Mixture of irrigated, non irrigated and pasture in parcel 20 year average rainfall and water holding capacity Enrollment in CRP Value of improvements is removed for bare land value Parcels under 40 acres are omitted Johnson and Wyandotte County parcels removed

12 PVD Sales Data Average Acres in Sale CRP Contracts 4.3% Sales Per County 25.1 All Years Total Sales Transactions: , , , ,789 31% drop in sales over past 4 years Model Predicted Sales Price ($/ac) Land Type Non Irrigated 2,777 2,994 Irrigated 5,232 5,012 Pasture 1,923 1,945 All Cropland and Pasture $3,311 $3, % decline from 2016

13 Land Model Results 4,000 3,500 Non Irrigated Land 19% decline Estimated Value ($/ac) 3,000 2,500 2,000 1,500 1, K State USDA Land Model Results 7,000 6,000 Irrigated Land 17.4% decline Estimated Value ($/ac) 5,000 4,000 3,000 2,000 1, K State USDA

14 Land Model Results 3,000 Pasture Land 21.4% decline 2,500 Estimated Value ($/ac) 2,000 1,500 1, K State USDA Long Run Growth

15 Kansas Land Values Red ( ) Green ( ) Purple ( ) 9.8% decline 31.6% decline 47.6% decline Rental Rates

16 2017 USDA Pasture Rents 2017 USDA Non Irrigated Rents

17 Public Information Limited public information on rental rates Surveys (USDA, some KS Counties) K State budgeting approach: what a representative farmer could afford to pay Comparisons need to be done carefully One measures what is actually being paid One measures what we expect could be paid Returns to Farming Returns over Total Costs ($/ac) NC KFMA Enterprise Analysis Wheat Corn Grain Sorghum Soybeans 150 Source: KFMA Enterprise Reports (

18 KSU Non Irrigated Rental Rates SW District Clark Finney Ford Grant Gray Hamilton Haskell Hodgeman Kearny Meade Morton Seward Stanton Stevens Average: KSU Non Irrigated Rental Rates NE District Atchison Brown Doniphan Jackson Jefferson Leavenworth Marshall Nemaha Pottawatomie Riley Wyandotte Average: $ $ $94.11 $106.21

19 USDA vs. KSU Finney Non Irrigated Rental Rates ($/ac) $ $70 $60 $50 $ $ $20 $10 $ Non Irrigated K State Source: USDA NASS and leasing USDA vs. KSU Riley Non Irrigated Rental Rates ($/ac) $160 $ $120 $100 $ $60 $40 $20 $ Non Irrigated K State Source: USDA NASS and leasing

20 Why are rents staying high? Multi year leases Consider signing 3 5 year leases but renegotiate rate annually Good yields in in some areas Kept some profitability in sector to pay rents that wouldn t be affordable with average or below average yields People are willing to pay more than they can afford in the short run Length of the short run is going to vary by producer Summary

21 Other Comments Land prices are still based on quality land having the highest demand and poor land having few buyers and lower prices. Appraiser in Central Kansas, September 2017 Farmers are the biggest buyers of farmland When farmers are reluctant to buy, demand falls and isn t likely to be sufficiently supported by outside investment Turnaround will happen when projections for net farm income rebound Online Resources 2017 Kansas County Level Ag Land Values leasing/land buying valuing 2018 Rent Estimates: Non Irr. & Irrigated Cropland leasing/land rental rates Pasture Rental Rate Tool leasing/land rentalrates/pasture rental rate decision tool

22 Kansas Land Values and Rental Rates Mykel Taylor Associate Professor K State Dept. of Agricultural Economics mtaylor@ksu.edu