WICHITA, Kan. (AP) - The rise in Kansas agricultural land prices appears to be accelerating in response to the incredible jump in the price of many agricultural products since mid-2010. A recent survey by Farmers National Co., a national brokerage for farm and ranch land, showed that non-irrigated crop land in central Kansas averaged $3,000 an acre, up 50 percent since June.
Irrigated farmland in central Kansas was up 15 to 20 percent since June, for an average of $3,500 an acre.
Other Midwestern states saw increases of 10 to 20 percent, according to the company. Farmland on the coasts may actually have fallen in value in recent years because development prospects have dried up.
The only agricultural land in Kansas seeing a drop is land bought for hunting preserves - a hot commodity until 2008.
Crop and pasture land, like any commercial real estate, attracts more buyers as the income it produces rises, say experts. More buyers plus fewer sellers equals higher prices.
Crop prices have seen an extraordinary run since early July. A bushel of wheat priced about $4 a bushel on July 4 is now more than $8.50. Other crops have experienced similar increases.
As the land generates more income, it puts more cash in the pockets of the most likely buyers, nearby farmers. It also provides an attractive return for investors who then rent it out to farmers.
The result: Auctions are drawing twice the number of bidders as before, said area agents.
Monty Meusch, areas sales manager of Farmers National, said his agents used to have a pretty good feel for what land would sell for at auction but find they are now often underestimating final bids.
"This thing has got pretty wild, with corn at $6 and wheat at $7 and $8, "Meusch said.
What's driving it
The surge in farmland prices is partly the result of normal supply and demand, and partly because of federal government efforts to revive the economy.
The Federal Reserve's printing of more dollars to revive the economy has reduced its value against foreign currencies. As that value has dropped, American exports have become cheaper and easier to sell overseas.
But the situation is complex. Many believe the U.S. actions have exported inflation outside the country, leading to rising prices for food produced elsewhere.
And the low interest rates set by the federal government to encourage borrowing also have an effect. They make it cheap to borrow and reduce the attractiveness of holding the money in alternative investments. This has driven up investor demand, and prices, of crops and the land to grow them.
Farmers, say agents, are comfortable owning land, so buying more is an obvious place to put their newfound surpluses.
It also has attracted those who are seeking higher returns than US. Treasury bonds and less risk than stocks. This includes the local doctor and banker, but it's moved beyond that.
Chris Ostmeyer of Farmers National in Wichita manages farms for out-of-town investors.
"These big investors are really national in scope," he said. "They'll rent it to the farmer and get a good return, better than they can get anywhere else right now."
These investors, whether local or national, are driving prices high enough in some instances that local farmers won't buy.