An October auction of the historic Rogler Ranch -- one of the Kansas Flint Hills' best-known spreads -- set a new area high when it fetched an average $1,696/acre, or $6.92 million. All but one of the ranch's seven tracts were purchased by individuals whose business interests are outside the cattle industry.

The sale is emblematic of the wave of outside capital propelling rural land prices to record highs, even after adjusting for inflation, writes Mike Fritz, editor and publisher of Farmland Investor LetterĀ®, in the January issue of BEEF magazine.

Nestled in a picturesque rural valley in the southern Flint Hills, the 4,081-acre Chase County ranch has a rich history that dates back to 1859, when Austrian immigrant Charles Rogler walked from Iowa to Kansas and claimed the ranch's original 160-acre homestead.

The ranch's new owners include Allen Wise, chairman of Coventry Health Care Inc., a Bethesda, MD, health-care insurer. Wise paid $4,280,900, or $1,666/acre, for 2,569 acres of grass and cropland. The purchase was small potatoes for the executive: He earned $3.1 million last year from Coventry and owns a $24.2-million stake in the company.

Other buyers include a Houston family in the oil and gas land-leasing business; a Wichita operator of three, rent-to-own furniture stores; and a group of Chicago investors.

Conspicuously absent from the Rogler sale was Texas billionaire Edward Bass, whose Texas and Kansas ranchland holdings include 33,123 acres in Chase County. A portion of Bass's spread adjoins the Rogler Ranch.

"Our viewpoint is pasture prices are obviously too high," says Cliff Cole, Bass's local ranch manager in Cottonwood Falls, KS. Bass last added to his Flint Hills holdings in spring 2005, when he paid $920/acre for 1,220 acres just east of the Rogler Ranch. The price was a new area high at the time.

Some local observers wonder if the Rogler sale will mark a near-term price peak for the Flint Hills. In early December, a 641-acre tract of Chase County bluestem pasture sold for $920/acre to a neighboring landowner.

Auctioneer Rick Griffin, who oversaw both sales, says the level of outside interest is dropping off.

"The cure to high land prices is high prices," Griffin says. "If the neighbors don't have the capability of buying it, we will [eventually] have difficulty getting outside people interested in it."

Locals say a good market test will come in early February, when the 7,317-acre Dunne Ranch in neighboring Butler County comes up for auction. Located 30 miles east of Wichita, the Dunne Ranch lacks the historic buildings and legacy of the Rogler Ranch, but is quality bluestem range.

Joe Sundgren, an El Dorado auctioneer overseeing the sale, expects the pasture to bring $700 to $1,500/acre. Others suspect the price could go higher.

Bass also owns land to the south of the Dunne Ranch, and Gottsch Enterprises Inc., the huge Hastings, NE-based cattle feeding business, owns land on the north end. Robert Gottsch, president, says he hasn't yet decided if he'll attend the auction. The Gottsches paid $1,575/acre for a 640-acre section of Butler County pasture in 2005.

"You can't make any money with cattle on land at these prices," Gottsch complains.

Flint Hills pasture rents for an average of $17.60/acre. Subtract $2.50/acre for property taxes, and $1,500 pasture generates a paltry 1% yield -- which suggests buyers are betting pasture values will continue rising.
-- Mike Fritz, www.farmlandinvestorletter.com