Kansas Agricultural Land Rental Rates › news › john-news-releases...–Acres in sale –Mixture of irrigated, non-irrigated and pasture –Soil types found on parcel –20-year

1/25/2016

1

Kansas Agricultural

Land Rental Rates

Mykel Taylor

Department of Agricultural Economics

Clay Center, KSJanuary 11, 2016

RENTS AND NET FARM INCOME

Returns to Farming

Source: KS Farm Management Association

Updated: Returns to Farming

Source: KS Farm Management Association

Cash Rents

Source: USDA-NASS

Rental Rates

• Survey results tend to lag market due to

– Survey reflect average rents paid (masks quality

differences)

– Doesn’t consider when the rental rates were

negotiated

–May include non-market activities

• Are there alternatives to the USDA-KASS

survey?

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Projected Rental Rates

• Another way to obtain an estimate of cash

rental rates for cropland

– Budgeting approach that reflects expected returns

to farming

–Marginal rental rate versus average rental rate

• Calculate crop share revenues based on long-

term profit expectation


• Crop share revenues

– Used predicted crop share % obtained by budgets

using current inputs costs and production practices

– County-level yields from a 20 year trend

– Expected cash prices from futures and local basis

• Biggest different between 2014 and 2016 cash

rent projections…

• Expected crop prices dropped significantly

between 2014 and 2016


Year

Harvest Futures Prices ($/bu)

Wheat Corn SoybeansGrain

Sorghum

2014 $7.02 $4.71 $11.45 $4.71

2015 6.09 4.19 10.09 4.19

2016 5.46 4.04 8.88 4.04

$ change -1.56 -0.67 -2.57 -0.67

Note: Prices are the average price of harvest futures contracts in preceding November

Non-Irrigated Rental Rates

Region2014 KSU ($/ac)

2015 KSU ($/ac)

2016 KSU ($/ac)

Northwest 70.90 38.75 19.59

West Central 65.51 30.18 13.08

Southwest 57.29 22.03 7.38

North Central 102.55 69.31 37.26

Central 86.27 53.79 26.73

South Central 69.29 42.61 19.38

Northeast 167.65 119.50 78.24

East Central 103.84 63.84 34.80

Southeast 55.83 31.64 9.99Source: Taylor, 2015

2016 values are not final!


• What do they represent?

• Budgeting approach with expected prices and

county yields gives an estimate of

–What a representative farmer could afford to pay

• Ignores

–Working capital (carry over from previous years)

– Debt obligations and other cash outlays

– Profits from owned land being reallocated


Region2014 KSU ($/ac)

2015 KSU ($/ac)

2016 KSU ($/ac)

Northwest 70.90 38.75 23.00

West Central 65.51 30.18 15.40

Southwest 57.29 22.03 8.70

North Central 102.55 69.31 38.14

Central 86.27 53.79 31.45

South Central 69.29 42.61 22.80

Northeast 167.65 119.50 92.00

East Central 103.84 63.84 41.00

Southeast 55.83 31.64 11.70Source: Taylor, 2015

2016 values are not final!

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NC District 2013 2014 2015 2016Clay 94.60 115.80 79.90 43.60

Cloud 89.20 108.80 75.10 41.30

Jewell 92.40 109.10 75.40 41.60

Mitchell 87.30 105.40 72.80 40.10

Osborne 76.90 86.00 59.50 32.90

Ottawa 74.70 92.50 63.70 34.90

Phillips 77.70 84.00 57.90 32.10

Republic 95.50 115.60 79.50 43.70

Rooks 66.80 66.20 45.70 25.30

Smith 87.20 98.60 68.10 37.60

Washington 102.30 123.00 84.80 46.40

Average: $85.87 $100.45 $69.31 $38.20

Returns to Land

• Has every farmer dropped their cash rents for

2016?

• Answer: No, but they are starting to…

• What is keeping the adjustment from

occurring quickly?

Returns to Land

• Residual cash from better revenue years will

allow farmers to be competitive a little longer

– Neighbors with more carry-over cash will keep

bids high

– But adjustments will occur if commodity prices

remain low

• Contracts length in Kansas averages 3 to 5

years

– Farmers are locked in for the short run

– Adjustments will be made as the contracts are

renewed

$94.60

$115.80

$79.90

$43.60

$0

$20

$40

$60

$80

$100

$120

$140

2013 2014 2015 2016

Rent ($/ac)

Rents and Net Farm Income

• Projected non-irrigated cash rents for Clay

County:

22%

-31%

-45%

PASTURE RENTAL RATES

• Pasture rents are at historic levels

– Jump in rent driven by high cattle prices

Pasture Rental Rates

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Pasture Rental Rates

• Different way to approach pasture rent

questions

– Start with assumption that not all pasture is

created equal

– Gain flexibility from changing range conditions

and market prices

– Give landowners and tenants a way to estimate

the value of good pasture

Pasture Resources

• A new pasture lease pricing tool is available at

– www.AgManager.info

– Collaborative effort with NRCS

• Contact information

–Mykel Taylor: [email protected]

– Robin Reid: [email protected]

PROPERTY TAX OUTLOOK

Property Tax Computations

• Defined as the eight year average of eight year

average of returns to landlord

– This eight year average is then capitalized at the

statute-defined capitalization rate (11-12%)

– Process places a weight on middle years of the eight

year window

• Designed to have a more smoothing effect on

tax values

– Removes variability in annual changes in returns

• Landlord net return comprised of last 15 years

of returns to the landlord

Non-irrigated Single Year

$0

$10

$20

$30

$40

$50

$60

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Landlord Return for Barton County (Central)

Source: Featherstone, 2015

Property Tax Computation

0%

2%

4%

6%

8%

10%

12%

14%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Eight-year average of an eight-year average


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Property Tax Computation

Eight-year average of an eight-year average

$0

$10

$20

$30

$40

$50

$60

0%

2%

4%

6%

8%

10%

12%

14%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Weight Landlord Return


Impact of Moving Forward

$26.69

$19.64

$28.59

$24.65

$27.82

$28.98

$11.56

$6.73

$8.61

$27.96

$20.21

$31.43

$26.53

$28.85

$31.17

$12.46

$7.26

$9.65

$0

$5

$10

$15

$20

$25

$30

$35

Barton Sumner Marshall Anderson Butler Jewell Ford Greeley Thomas

2012 2013

4.8% 2.9% 4.5% 7.6% 3.7% 7.6% 7.8% 7.9% 12.1%Percent Change:


Property Tax Issues

• Look for more information on this coming

soon

–Webinar with Dr. Allen Featherstone

– Additional materials with county-level estimates

Kansas Agricultural

Land Values and Rental

Rates

Mykel Taylor

www.AgManager.info

[email protected]

Online Resources

• 2014 Kansas Agricultural Land Valueshttp://www.agmanager.info/farmmgt/land/county/CountyValues_Apri

l_2015.pdf

• 2014/15 Rental Rates for Non-Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyNon-

irrigatedRents(Jan2015).pdf

• 2014/15 Rental Rates for Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyIrrigatedRe

nts_Feb-2015.pdf

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Kansas Agricultural

Land Values

Mykel Taylor

Department of Agricultural Economics

Ag Profitability ConferenceColby, KS

January 6, 2016

AG LAND VALUES FROM SURVEYS

2015 Cropland Values 2015 Pasture Values

Kansas Land Values

Source: USDA-NASS

Rent-to-Land Value Ratio

Source: USDA-NASS

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MARKET-BASED LAND VALUES

• Source for market transaction data

– Property Valuation Department, Topeka

• 2010-2014 and 2015 (Q1-Q2) sales data

– STR location

– Acres in sale

–Mixture of irrigated, non-irrigated and pasture

– Soil types found on parcel

– 20-year average rainfall by section

– Enrollment in government set-asides

– Value of improvements

Kansas Land Values

PVD Sales Data 2010-14

2014 Average

Acres in Sale, 2014 229.7

CRP Contracts, 2014 1.80%

Sales Per County, 2014 15.0

All Years

Total Sales Transactions: 8,743

2014 17.8%

2013 16.1%

2012 19.3%

2011 20.5%

2010 26.3%

PVD Sales Data 2010-15 (Q1-2)

All Years Average

Acres in Sale 156.3

CRP Contracts 1.50%

Sales Per County 136.9

Total Sales Transactions: 14,374

All Years % of Total Total Acres

2015 Q1-Q2 10.2% --

2014 15.7% 354,356

2013 16.0% 362,948

2012 17.0% 383,119

2011 17.6% 401,975

2010 23.3% 518,322

PVD Sales Data 2014 & 2015 Q1-2

2014Average

$/ac

% of All

Transactions

Non-Irrigated $2,730 54.7%

Irrigated $3,464 4.9%

Pasture $2,035 40.4%

All Cropland and Pasture $2,743 100%

2015 Q1-Q2Average

$/ac

% of All

Transactions

Non-Irrigated $2,289 47.6%

Irrigated $3,484 11.3%

Pasture $1,765 41.1%

All Cropland and Pasture $2,513 100%

Land Model

Land Type

2014 Data Sample

Average $/ac

2014 USDA-

NASS $/ac

Non-Irrigated $2,833 $2,150

Irrigated $3,478 $3,280

Pasture $1,991 $1,300

• Use of a regression model to estimate land values

– Alternative to summary statistics (average, range)

– Accounts for variability in land found in sample

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LAND MODEL RESULTS

Land Model Results

Source: Taylor, 2015

$1,608

$1,920

$2,381

$2,822$2,990

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2010 2011 2012 2013 2014

Estim

ated Value ($/ac)

Non-Irrigated Cropland

Land Model Results

$1,490$1,694

$2,077

$2,448 $2,504$2,652

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2010 2011 2012 2013 2014 2015Q1-Q2

Land Sale Price

($/acre)

Time Period

Non-Irrigated CroplandState Average

Land Model Results


$2,660

$3,526

$4,706 $4,761

$5,169

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2010 2011 2012 2013 2014

Estim

ated Value ($/ac)

Irrigated Cropland

Land Model Results

$2,659

$4,302

$5,750

$5,082

$5,977

$6,945

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

2010 2011 2012 2013 2014 2015Q1-Q2

Land Sale Price

($/acre)

Time Period

Irrigated Cropland State Average

Land Model Results


$1,092$1,238

$1,437

$1,658$1,802

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2010 2011 2012 2013 2014

Estim

ated Value ($/ac)

Pasture Land

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Land Model Results

$945

$1,243$1,333

$1,486

$1,660

$1,818

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2010 2011 2012 2013 2014 2015Q1-Q2

Land Sale Price

($/acre)

Time Period

Pasture State Average

2014 Non-Irrigated Land Values

$2,296

$2,060

$1,472

$3,239

$2,825

$2,852

$5,133

$3,888

$3,140

2014 Pasture Land Values

$1,385

$1,242

$887

$1,953

$1,703

$1,720

$3,095

$2,344

$1,893

2014 Irrigated Land Values

$5,970

$5,413

$3,389

---

---

$6,008

---

---

---

Land Value Trends

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2010 2011 2012 2013 2014 2015

Land Sale Price

($/acre)

Time Period


Land Value Trends

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000


2010 2011 2012 2013 2014 2015

Land Sale Price

($/acre)

Time Period


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Land Value Trends

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000


2010 2011 2012 2013 2014 2015

Land Sale Price

($/acre)

Time Period


Land Model Results

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000


2010 2011 2012 2013 2014 2015

Land Sale Price

($/acre)

Time Period


Land Model Results

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000


2010 2011 2012 2013 2014 2015

Land Sale Price

($/acre)

Time Period


Land Price Expectations

• Actual land sales are not falling off as quickly

or dramatically as we expected

• Lender’s surveys and USDA surveys indicated

an expectations of lower land values

• Not showing up in the data. Why?

– Slowdown hasn’t happened yet

– I can’t measure no-sales

Land Model Results


0

1,000

2,000

3,000

4,000

5,000

6,000

Va

lue

, $

/acr

e

KS-PVD

USDA-NASS

Pasture Non-irrigated Irrigated

Land Model Results

Year

Non-

Irrigated Irrigated Pasture

Annual % Change in Value

2010-11 19% 33% 13%

2011-12 24% 34% 16%

2012-13 19% 1% 15%

2013-14 6% 9% 9%

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LAND VALUE PROJECTIONS

Returns to Farming

Forecasting Land Values

• Based on an estimated model for Kansas land

values, the one-year multiplier for net farm

income for acre was 1.50

– The long-run multiplier is 21.71 or an implied

capitalization rate of 4.61%

• At the projected net farm income per acre of

$53…

– Projected long-run Kansas land price is $1,151 a

decline of 43.3% $0

$500

$1,000

$1,500

$2,000

1880

1885

1890

1895

1900

1905

1910

1915

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Land Value ($/acre)

KS Farmland Value

Geometric Growth


Geometric growth rate = 3.4%

$0

$500

$1,000

$1,500

$2,000

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Land Value ($/acre)

KS Farmland Value

Geometric Growth


Geometric growth rate = 3.95%

$0

$500

$1,000

$1,500

$2,000

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Land Value ($/acre)

KS Farmland Value

Geometric Growth


Difference in value =

-30% to -50%

How long to get there?

2015 Value = $2,030/ac

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Kansas Agricultural

Land Values and Rental

Rates

Mykel Taylor

www.AgManager.info

[email protected]

Online Resources

• 2014 Kansas Agricultural Land Valueshttp://www.agmanager.info/farmmgt/land/county/CountyValues_Apri

l_2015.pdf

• 2014/15 Rental Rates for Non-Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyNon-

irrigatedRents(Jan2015).pdf

• 2014/15 Rental Rates for Irrigated Croplandhttp://www.agmanager.info/farmmgt/land/county/CountyIrrigatedRe

nts_Feb-2015.pdf

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Kansas Agricultural Land Rental Rates › news › john-news-releases...–Acres in sale –Mixture of irrigated, non-irrigated and pasture –Soil types found on parcel –20-year