Are land prices falling?

Are land prices falling?

A recent article in the Wichita Eagle quoted Mykel Taylor, a farm economist at

Kansas State University in which he predicts a drop of 30-50 percent from the peak as land prices return

to their long term trend. As a real estate broker and auctioneer for more than 40 years currently I don’t

see price drops of this magnitude. It appears good quality farmland in South Central Kansas has

decreased 10-15 percent whereas lower quality farmland has decreased 20-30% from the highs in 2012-

2014. Grassland values have remained fairly stable, especially in the Flint Hills area.

There appears to be plenty of buyers who are willing to purchase land that will return 1.5-2.5% on

investment primarily as those buyers look at land as a safe haven for their money. At a recent land

auction more than 20 people registered to purchase two separate farms. Many of these prospective

buyers were farmers in the area, however we are seeing more investors show up at auctions with cash

to spend.

Commodity prices have declined 40-50 percent from highs in 2012 and 2013. Livestock prices have also

dropped considerably in the last 12-18 months. Lower grain and livestock prices resulted in 40% or

more drop in net farm and ranch income in 2015 as compared to the prior year.

Where are we headed?

A continuation of lower grain and livestock prices will result in additional net

income reductions. Lenders are now beginning to require additional collateral such as land in order to

continue making farm operating loans. Good operators will survive. Some of the more seasoned

farmers will retire rather than borrow more money. Only an improvement in grain and livestock prices

will turn the ag markets around. Farmers are eternal optimists—things will be better next year!

-Larry Theurer, Owner/Broker

Theurer Auction Realty

Posted in Land, Uncategorized

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