In recent years, forgetting for the moment capital gains and estate taxes, land sales by farmers often have meant their landships have come in.
That’s a play on an old saying from sailing ship days when owners felt rich when their “ships came in” from the treacherous ocean journeys laden with rich cargoes.
I have lived long enough to witness a long run up in land prices, followed by an over-the-side decline and deep bottom accompanied by a farm depression (early and mid 1980s) and then another long upward run to amazing levels the last few years. Last week I mentioned some Iowa ground selling for $9,000 an acre, a not unusual price there.
But what’s going on in Kansas these days? The Kansas Agricultural Statistics service, a sub-agency financed in part by the U.S. Department of Agriculture, has out a report filled with data, including cash rental rates paid by farmers for various kinds and uses of land.
Might as well get started. Take some anti-eye glaze – numbers ahead.
Estimated average value of irrigated ground was $2,200 an acre; non-irrigated brought $1,700, while all crop land averaged $1,750. Irrigated land rented for $119, while non-irrigated brought $52.50. All of those numbers were big jumps over last year. The increase in land value this year from last year on irrigated ground was 16 percent; the rise for non irrigated was 26 percent and for pasture it was 17 percent.
Naturally, those values differed vastly from a low of $31.50 an acre for non-irrigated crop ground in southwest Kansas to a high of $105 an acre in northeast Kansas. Brown County had the highest rent average for non-irrigated crop land at $160 an acre.
Pasture and rangeland were valued at $950 an acre with the rent averaging $16.50. Those also varied a great deal from the semi-arid (it was all arid this year, folks) realm of southwest Kansas at $10 rent an acre to the northeast district’s $22.50 average rent.
How much longer will this upward trend last? I do not know. Readers know all of the same old sayings and bromides that I do, as well as some of the old lenders’ and economists’ utterances.
You know, what goes up must come down… but…they don’t make more land…or…this will hold unlike last boom because farm debt is down…or…it’s all propped up by revenue insurance, tax swaps, CRP payments, ethanol subsidies, land speculators…and so on.
The last land crash was spectacular. Old land financed new land sometimes back then and still the old land was lost. The 1985 bottom in land was ushered in several years earlier by the high-interest, high inflation rates of the Carter era.
Often farm production loans charged interest rates of more than 20 percent! Low commodities prices could not service what often were very high debt loads by many farmers. Sons borrowing against their parents holdings often took everyone in the family out.
Those who survived were often in position after land bottomed to expand greatly their holdings. A new bankruptcy law for farmers was created, Chapter 12. It was a consolidation and new era in agriculture in America.
The losers were many. The feelings were often bitter and sorrowful. Many who successfully changed careers recall that time with deep sadness. Some were my friends.