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Booming land market continues

DANIEL LOOKER Updated: 05/13/2011 @ 4:38pm Business Editor

In the first quarter of 2011, land values in the U.S. heartland surged by 20% over a year earlier, according to a just-released survey of bankers in the Federal Reserve’s Tenth District ­– which includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico and the western third of Missouri.

The survey by the Federal Reserve Bank of Kansas City found the biggest land value increases in Nebraska and Kansas ­– at nearly 24% for nonirrigated cropland. Irrigated cropland was up 23.5% in Nebraska and 18.3% in Kansas. Ranchland also rose by about 11% across the district.

“The farm boom is continuing,” said Brian Briggeman, an economist based at the Bank’s Omaha office and co-author of the latest land value report. “Bankers are expecting it to continue.”

Briggeman said some of the 256 bankers responding to the survey have talked about the possibility that record high land prices may be “a bubble in the making” as one Missouri lender put it.  But for now, the consensus is that land prices will remain strong in the second quarter of 2011, with more than two-thirds expecting the rise in cropland values to level off.

“I don’t think any are expecting them to come down,” Briggeman told Agriculture.com.

Strong farm income is driving land sales made mostly to farmers. And the run up in values mirrors the boom of 2008, which also saw quarters when value increases topped 20%. Even after commodity prices crashed in late 2008 and through 2009, farmland prices in the district only fell  back in one quarter, and by less than 5%.

That wasn’t true of other regions of the country, however, Briggeman said.

“You saw a lot of stress on farmland values on the coasts,” he said. That’s where the collapse of the housing bubble hit the value of farmland that once had greater value for its development potential.

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