November 22, 2006 | By: Laura Skillman
PRINCETON, Ky.

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