Can You Take Me Higher

Creed's song Higher, with its chorus "can you take me higher," came to mind when learning of the latest increase in farmland values from the Federal Reserve Bank of Kansas City. Despite many headwinds, farmland values continue to answer Creed's question with an emphatic "yes". The latest evidence comes from a survey of commercial bankers by the Kansas City Federal Reserve Bank. Bank economists Cortney Cowley, Jannety Mosely, and Ty Kreitman report bankers in the Tenth District (Nebraska, western Missouri, Kansas, Oklahoma, Colorado, Wyoming, and northern New Mexico) indicated the value for non-irrigated land rose 11 percent in the fourth quarter of 2023 compared to 2022. Values on irrigated and pasture ground exceeded 2022 levels by 7 percent. The increases on non-irrigated and irrigated land in Nebraska were the highest in the district, up 15 percent and 9 percent, respectively. Pasture ground in Nebraska was up 3 percent.

The growth in land values came despite lower commodity prices, higher interest rates, and reports of financial strain among producers. Cowley and coauthors suggest fewer sales last year compared to 2022 may be responsible for the strength in values (Figure 3). Bankers in all states except Missouri reported fewer sales in the fourth quarter compared to the prior year. But the demand for land also remains strong. The share of farmland purchased by farmers reached almost 80 percent, the highest since 2015. One would think, given the headwinds, land prices would start to stagnate and eventually the response to Creed's question would be "no." The annual Nebraska Farm Real Estate Report by the University of Nebraska, Department of Agricultural Economics, due out in a few weeks should provide more clues.

FIGURE 3. VOLUME OF FARMLAND SALES, 4TH QUARTER, 2023

Source: Cortney Cowley, Jannety Mosley, and Ty Kreitman, Farmland Values Remain Resilient, Federal Reserve Bank of Kansas City, February 8, 2024.