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Land accounts for more than 75% of a farm operation's total assets and thus knowledge of land values are very important to landowners. However, many other parties, including lenders, appraisers, investors, and researchers also have significant interest in land markets. Over the past few decades, land prices in Kansas have increased significantly for many different reasons. The main objective of this research is to estimate the impact of various factors on Kansas land values using a hedonic regression model. In cooperation with the Property Valuation Department (PVD) of the Kansas Department of Revenue, farmland market transactions from 1986 to 2009 were obtained for this study. Hedonic models were estimated using Ordinary Least Squares to determine the impact of interest rates, urban areas, location, parcel size, and income on nominal and real Kansas land values. The estimated nominal and real models explained 24.1% and 17.2% of the variation in land prices, respectively, and the results from this study are generally consistent with previous research. This research went further into investigating the relationship between PVD data and United States Department of Agriculture (USDA) surveyed data. Results from this study indicate that USDA surveys significantly underestimate the true market for land prices across Kansas.
The average land price in Kansas has recently been through a period of large growth and decay, nearly doubling from 2010 to its peak in 2014, but falling from 2014 to 2017 in both real and nominal terms. However, there is anecdotal evidence that not all land prices are dropping at the same rate. Lower quality land prices seem to be dropping at a higher rate than the higher quality land prices. The goal of this analysis is to give analytical evidence to support the belief of different rates of price changes for different qualities of land. The hypothesis is that once the farm economy entered its period of negative growth, the producers that over-leveraged themselves needed to sell some of their assets to correct their balance sheets and that low quality land is the primary asset liquidated. The producers that did not over-leverage themselves would still be looking to purchase the right piece of land. This creates a surplus of less preferred low quality land on the market, while the supply and demand for the high quality land stays strong. This analysis was completed using 56,291 observations on land sales from 33 years starting at the beginning of 1985 and continuing on through the middle of 2017. A real price per acre for the land weighted by the number of acres in each parcel was calculated for each quarter, as well as a variable with the price of land lagged one quarter. Data on real net farm income, the S&P 500, and 30-year fixed-rate mortgage interest rates were also collected and used to create averages for each of the 131 quarters analyzed in this work. Finally, a variable representing the percent of all sales in each quarter in the bottom 25 percent in quality of all land sales was created. Quarterly dummy variables were included to control for seasonality. Two regressions were run with the only difference being the exclusion of the variable representing the bottom quality sales in the first in order to compare the results. Analysis of the first regression shows positive relationships between the dependent variable of the logged real price per acre and the independent variables of the logged lagged real price per acre, real net farm income, the S&P 500, and land sold during the third quarter of the year compared to the first quarter. There is a negative relationship suggested between the logged land price and the 30-year fixed-rate mortgage interest rate. Inclusion of the variable representing sales of land in the bottom quartile of quality suggest results consistent with the first regression, with some of the variables becoming more statistically significant. More importantly, this analysis shows a negative relationship between average land price and the variable representing land quality. This shows that the average land price is affected by the quality of the land sold at a statistically significant level.
Describes changes in Kansas land prices and related factors, along with some causes of changes.
According to the United States Department of Agriculture's Economic Research Service (USDA ERS, 2018), land comprises greater than 80 percent of the assets in the farm sector. Because land makes up such a large majority of assets in the farm sector, changes in the value of agricultural land has a significant impact on all who have a stake in the farm sector. Many previous studies have attempted to explain the variation in farmland values, but none have considered the possibility that confined animal feeding facilities (CAFOs) with a certain proximity of an agricultural land parcel may have an effect on the value of the land. Using agricultural land parcel sales data from the Kansas Department of Revenue Division of Property Valuation between the years of 2011 and 2017 and CAFO data provided by the Kansas Department of Agriculture, this study attempts to determine if a meaningful relationship exists between the sales price of Kansas agricultural parcels and the number of CAFOs within a given distance. This study found a positive relationship between the price per acre of agricultural landsales and CAFOs within 25 miles of the parcel sale on average between the years of 2011 and 2017, and a negative relationship between the sales price per acre of agricultural land and the number of CAFOs between 25 miles and 50 miles of the parcel sale.
Presents farm-land value data and brief explanations of trends dating back approximately 100 years.
Value of land is a combination of multiple characteristics of the parcel including water availability, which can greatly affect land sale prices. The objective of this study is to determine the relationship between water availability and land sale prices in Kansas. Within the study region of the 31 westernmost counties in Kansas, the primary source of irrigation for crop production is the Ogallala Aquifer. To this day, depletion rates of the aquifer greatly exceed recharge rates and aquifer water levels continue to steadily decline. As water from the aquifer becomes more scarce, profitability and land values will also decline. A solid understanding of the impact water availability has on land values is imperative to better estimate future land values. Data from the Property Valuation Division (PVD) of the Kansas Department of Revenue (KDR), the Water Information Management and Analysis System (WIMAS), and the Kansas Geological Survey (KGS) were all utilized to determine the relationship between water levels and land values. A hedonic price method was employed to analyze the data. Irrigated parcels have a greater premium compared to dryland operations. In general, a majority of producers in western Kansas are commonly more concerned about having the ability to irrigate rather than the amount water available to irrigate.