Kansas City Fed: Midwest farmland values up more than 20% in 2021; non-farmer investors increasingly buying in

Change in Tenth District farmland values (Charts by Federal Reserve Bank of Kansas City )

"Fueled by strong farm income and low interest rates, farmland values soared more than 20% in the Central Plains during 2021, according to a quarterly survey of ag bankers by the Kansas City Federal Reserve Bank," Chuck Abbott reports for the Food & Environment Reporting Network. "A majority of the lenders said they expected values to increase this year, but an equally large number 'also indicated that farmland values were currently overvalued, suggesting there may still be future risks of declines,' said the regional Fed." The Kansas City Fed's Tenth District is Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri.

Nonirrigated farmland value was up an average of 24%, irrigated farmland and ranchland were up 22% last year, mostly because of "strong demand, historically low interest rates, and vastly improved conditions in the farm economy," according to the report. The higher prices and greater interest in farmland often make it difficult for new and minority farmers to buy in.

The report also noted that non-farmer investors account for an increasing share of farmland sales. "Despite a higher volume of sales, farmers accounted for a smaller share of the total farmland purchased in the District," says the report. "Farmers still accounted for more than 70% of farmland purchases in 2021, but unlike the prior period of strengthening farm income immediately after 2010, the share of land purchased by farmers declined slightly. The modest pullback in purchasing activity from farmers alongside broad strength in the agricultural economy suggests strong interest in farmland from non-farmers and outside investors."