Oklahoma Land Value Update Roger Sahs, Extension Specialist, Ag Econ.

OK Land Values by Region, 2011 West-Northwest Tracts 142 Size 275 $/Acre $1226 % Chg +25.5 North Central Tracts 124 Size 140 $/Acre $1403 % Chg +14.3 Northeast Tracts 241 Size 191 $/Acre $1578 % Chg +2.8 East-Northeast Tracts 55 Size 123 $/Acre $1816 % Chg +4.2 Panhandle Tracts 26 Size 522 $/Acre $662 % Chg +15.8 Southeast Tracts 184 Size 212 $/Acre $1468 % Chg +5.3 State Averages Tracts 1052 Size 207 $/Acre $1383 % Chg +7.3 Overall, values increased 7.3% since 2010 with cropland gains on a percentage basis exceeding pasture ground.  Regional  differences  for the year were rather substantial.  Southwest Tracts 192 Size 215 $/Acre $1040 % Chg +5.1 South Central Tracts 88 Size 167 $/Acre $1588 % Chg +11.9 OK Land Values by Region, 2011

Recent Trends in Oklahoma Land Values District 2011 One Year Change 3 Year Change 5 Year Change $/ac Percent Change Panhandle 662 15.8 28.2 114.1 West-NW 1226 25.5 21.6 63.8 Southwest 1040 5.1 11.3 55.4 North Central 1403 14.3 13.5 25.3 South Central 1588 11.9 -2.7 17.9 Northeast 1578 2.8 6.6 24.2 East-NE 1816 4.2 -2.1 4.6 Southeast 1468 5.3 2.7 26.5 Cropland 1390 17.4 20.2 53.1 Pasture 1449 4.0 3.5 18.3 State 1383 7.3 8.2 26.1 Greatest appreciation in values has been in the western 1/3 of the state since 2006. markets characterized by spirited demand and a limited supply of parcels. Regional variations are characterized by cropland/grazing land mix. Source: www.agecon.okstate.edu/oklandvalues

Oklahoma Cropland vs Pastureland Prices In nominal $, there has been a full recovery of land values from years of devaluation. Since 1981, land values have rebounded 104% from 678 - 1383. In real or inflation adjusted terms, values are still 17% below their peak. It was not until 2000 that the average nominal value per acre surpassed the early 1980's levels. Tracts consisting of mostly cropland have not increased in value as much as tracts dominated by pasture until recently, but still lag 38% in real terms. In real terms, pasture ground appreciation has kept up with the general rate of inflation. Pasture values heavily weighted by the number of 40-80 ac sales tracts in Eastern OK. ½ of all tracts in dataset are pasture, 15% cropland. Source: www.agecon.okstate.edu/oklandvalues

Survey of Tenth District Ag Credit Conditions Strong demand for cropland and limited supplies of farms for sale continued to support this land market. A strong cattle economy influenced pasture values despite continued drought conditions in states like OK. Historically low % rates and pockets filled with cash allowed producers to finance half of new purchases. These demand elements are expected to continue Likely, the real truth in land value % gains is somewhere inbetween. Source: KC Federal Reserve Bank, First Quarter, 2012

Tracts >= 40 Acres and <= $3000/Acre Wheat belt dominant in early time period with average values between $500 and $700 per acre. North Central had highest land values in state other than Oklahoma City and Tulsa areas. Values generally less than $500 per acre for rest of state. 1973-1975 Average Value Tracts >= 40 Acres and <= $3000/Acre Source: www.agecon.okstate.edu/oklandvalues

Tracts >= 40 Acres and <= $3000/Acre Largest gains in eastern Oklahoma and around metro areas with all but 11 counties above $1000 per acre and 28 over $1500. Over the past 35 years, western Oklahoma land value experienced modest gains especially where cropland is predominant. Five fold variation in prices from west to east. 2009-2011 Average Value Tracts >= 40 Acres and <= $3000/Acre Source: www.agecon.okstate.edu/oklandvalues

OK Counties with Largest Percentage Increase in Land Values County 1973-75 Average($) 2009-11 Average($) % Change Love 356 1,957 450 Marshall 339 1,819 437 Johnston 308 1,612 423 Okfuskee 214 1,105 416 Pittsburg 272 1,380 407 LeFlore 274 1,389 Coal 273 1,372 402 Pushmataha 292 1,459 400 Adair 340 1,685 396 Delaware 382 1,878 392 What do these counties have in common? Eastern OK east of I35. Source: www.agecon.okstate.edu/oklandvalues

OK Counties with Smallest Percentage Increase in Land Values County 1973-75 Average($) 2009-11 Average($) % Change Alfalfa 800 1,193 49 Grant 590 1,004 70 Kingfisher 646 1,122 74 Texas 334 633 89 Garfield 628 90 Cimarron 210 402 92 Kay 601 99 Major 469 1,030 120 Noble 472 1,077 128 Cotton 384 887 131 What do these counties have in common? Primarily cropland areas of western OK west of I35 Source: www.agecon.okstate.edu/oklandvalues

Land prices going ahead… Changes in the environment Farm Bill Domestic economy Global economy Elections/policy Interest rates Recreational uses Wildlife habitat, wildlife population Development uses Population growth Per capita income Agriculture Input prices Cattle, wheat/feedgrain prices Yields Efficiency, productivity Continued drought Land is an income producing asset..so anything that impacts earnings impacts its value. Big factors is anything that impacts farm income and interest rates We do have strong balance sheets and liquidity going into drought Before declines will occur, farmland return v or % ^. Capital spending v Loan repayment rates v Liquidity v Economic conditions remain uncertain and financial management will be as important as production performance. 

Source: KC Federal Reserve Bank, Second Quarter, 2012 However, falling interest rates have countered declines in cash rents relative to farmland prices. Falling interest rates tend to support increases in all asset prices – including farmland prices – for two reasons. First, declining interest rates make it easier to finance farmland purchases. As interest rates decrease, loan repayment amounts decrease, thereby increasing the demand for farmland. Second, interest rates represent returns on alternative, fixed income investments to farmland. As interest rates fall, the attractiveness of fixed income investments fall relative to farmland, thereby providing support for farmland prices. Source: KC Federal Reserve Bank, Second Quarter, 2012

Current commodity prices are a strong factor behind recent land value trends. We’ve seen strong earnings from high commodity prices.

www.agecon.okstate.edu/oklandvalues Updated for 2011. Thanks to Farm Credit Assoc for continued assistance with our efforts.

Resources Agecon.okstate.edu/oklandvalues Kansas City Federal Reserve Bank http://www.kc.frb.org/ Choose RESEARCH & DATA, then Economic Review or Agricultural Credit Survey USDA Ag Land Value Data and Reports http://www.nass.usda.gov/Charts_and_Maps/Land_Values_and_Cash_Rents/index.asp