November 14, 2001 | By: Laura Skillman
PRINCETON, Ky.

Farm real estate values in Kentucky and across the United States continue to rise.

This continues a trend that began in 1987, when the value was $878 an acre in Kentucky. Today's level is $1,770, based on January 2001 estimates by the National Agricultural Statistics Service

"These changes in farm land values seem inconsistent with the current agricultural economic conditions which are characterized by relatively low commodity prices," said Dick Trimble, University of Kentucky Cooperative Extension Service agricultural economist. "In much of the state the big influence on land value is urban. It is a reflection of the non-farm demand for land for metropolitan expansion and recreational uses."

Low interest rates and a poorly performing stock market may also be influencing investors to consider land investment as an alternative, he said.

In addition, government farm programs and emergency aid may be providing farm managers with sufficient liquidity to encourage land purchases for expansion, Trimble said.

"Without the government payments, land values away from the urban areas would be less likely to have increased," he said. "These payments have given the farmer the ability to maintain or increase their farming operations."

The National Agricultural Statistics Service releases farmland and building value estimates annually. In addition, Trimble collects data through an annual survey of county Extension agents for agricultural and natural resources.

Information from the county agents is their estimation. Trimble said by doing the annual survey he tries to identify how things are moving at a specific time and to have data that can be broken down geographically. He said he is confident in the estimations of the agents because they are in their areas every day and have a feel for what land is valued at and what it rents for.

In the 2000 agent estimates, farm land rates in west Kentucky are more closely linked to low grain prices while higher rates in central and eastern Kentucky reflect pressures from the large urban areas of Louisville, Lexington and Northern Kentucky.

In both sets of figures, the bottom line is that the general economy and farm payments are key factors in determining farm land value and rental payments.

The prices for rental payments have been relatively stable in recent years with only a $2 per acre drop to $72 per acre from Jan. 2000 to Jan. 2001.

Factors that will impact land values and rental payments in 2002 include the Sept. 11 attacks, the general economy and farm legislation.

In a slow economy, people tend to hunker down and try to maintain what they have. That could result in less non-farm demand for agricultural lands.

In west Kentucky, the land values and rental rates will hinge heavily on government payments. If changes in agricultural policy are made, governmental priorities change and money shifts away from farm payments, then rates are not expected to rise.

However, answers to how government programs will impact farming next year may not be answered before farmers must agree on rental rates for the coming year.

Contact: 

Dick Trimble, 270-365-7541