Cropland Prices Rise More Than 6%

The Federal Reserve Bank of Kansas City (representing Kansas, Missouri, Nebraska, Oklahoma, and the Mountain States) just reported that non-irrigated farmland prices for the year-over-year ended September 30, 2010 rose more than 6%.  Irrigated cropland was up an even more robust 9.6%. 

After dipping slightly in the third quarter of 2009, prices have risen each of the last four quarters.  Kansas saw their prices rise more than 12% during the year, while Missouri, Oklahoma and the Mountain States only saw modest gains.

Cash rental rates were up about 5% for cropland and 2% for range land.

Rising farmland values were driven by strong demand from both farmers and investors.  Bankers reported that investors expect an average rate of return of between 5% and 6% on farmland investments.

There has been a two-year decline in the number of farms available for sale and bankers believe that with the possible rise in capital gains rates in 2011 that more farms may become available.