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Agricultural Land Values Continue to Rise
By
Laura Skillman
 PRINCETON,
Ky., (Nov. 22, 2006) – The price for agricultural land continues
to rise in the United States with some states, including
Kentucky, seeing double-digit increases.
Figures released by the U.S. Department of Agriculture this fall
show Kentucky’s farmland gained in value by 10 percent between
2005 and 2006. This is the largest percentage increase since
1980 and the largest dollar increase ever. The average price,
according to the report, was $2,750 per acre in Kentucky and
$1,900 per acre nationally.
To supplement the USDA numbers, an annual survey is taken of
University of Kentucky Cooperative Extension Service agents. The
survey data, collected by Richard Trimble, UK Extension
agricultural economist, shows county agents estimate the overall
value of the state’s farmland at $2,683 per acre. Regionally,
farmland in eastern and western Kentucky was rated to have the
highest values by agents at $2,757 and $2,742, respectively.
Agents in central Kentucky estimated farmland to be worth an
average of $2,525.
“Low interest rates, a robust economy and a strong demand for
farmland for nonagricultural uses have all contributed to the
ongoing increase in farm real estate values,” Trimble said. “If
these conditions continue, we can expect land values to continue
to increase. Should any of these conditions change, we can
expect farmland value to respond accordingly.”
Favorable government farm programs and strong commodity prices
also play a factor in increasing land demand as farmers look to
expand, with limited acres available to do so.
Cash rental rates do not move as fluidly as land values, Trimble
said. But strong demand is also playing a role in cash rents for
farmland. The USDA reported Kentucky cropland cash rent in 2006
at an estimated $78 per acre compared to $73 in 2005. The agent
survey had rental rates for cropland averaging somewhat higher
than the USDA at $80.71 per acre and pasture for $31.35 per
acre. The USDA does not report rental rates on pasture land.
Kentucky once had more crop share rental arrangements where the
landowner and renter shared both in the costs of production and
in the crop produced, generally on a percentage basis. Today,
rental arrangements are almost exclusively for cash.
“Kentucky farmland value no doubt has been going up over time,”
Trimble said. “Cash rent has been going up a little slower, but
is still going up with west Kentucky having the highest rates.
Pasture rates have also been going up but not nearly as much as
cropland.”
Land values are expected to increase again in 2007, he said. How
much is yet to be seen. The economy, interest rates and demand
for land will all play a role in how rapidly rates will continue
to increase. |
Contact: Richard Trimble, 270-365-7541, ext. 223 |
|
The UK College
of Agriculture, through its land-grant mission, reaches across
the commonwealth with teaching, research and extension
to enhance the lives of Kentuckians. |
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Copyright © 2001-2006 University of Kentucky, College of Agriculture,
Kentucky Cooperative Extension Service |
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