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Although a variety of factors are at play, some positive and some negative, ranchland values will remain steady to up slightly in 2014.
Even though it’s surrounded by uncertainty, it’s steady as she goes for ranchland values in 2014, experts say. That’s thanks to a growing appetite for cowherd expansion and the continued low interest rates that have added a positive puff to the wind beneath the wings of land prices in the last decade.
The question is, the experts say, will that be enough to counter a downturn in corn prices and the effect that it has — in some regions at least — on pasture values?
Which leads many, including George Clift, owner of Clift Land Brokers in Amarillo, TX, to answer honestly when asked what land values will do in 2014. “I don’t know,” he says. Part of that uncertainty comes from the fact that in the area he works — Texas, Oklahoma, New Mexico and Colorado — not many ranches are on the market. “It’s in tight hands, and there’s not much that sells,” he says, which makes it hard to set any definitive trends.
However, for ranches that have been properly managed, he expects a steady market in 2014. As the region emerges from the ravages of drought, ranches that were destocked in a timely fashion and grazed properly during the drought will be the most desirable ranch real estate as the industry looks for more grass to handle an expanding cowherd.
Kevin Dhuyvetter agrees. “I think we will see pasture values remain strong, but we won’t see the big increases that we’ve seen in recent years,” says the Kansas State University ag economist. “I suspect we’ll see pasture values steady to up slightly relative to 2013.”
If that expectation holds, it will mean a flattening in land values, based on a trend-line analysis of pasture values the past 10 years.
Pastureland values in Kansas for the past 10 years showed an average annual growth rate of 12.1%. However, for the past two years, the growth was double that, at 24.2%. That compares with an average annual growth rate in pasture rents of 3.4% and 4.6% in the past two years, he says (Figure 1).
Price trends reported by the Kansas City Federal Reserve have been slightly higher for pasture in its district (CO, KS, NE, OK, WY, northern NM and western MO), he says, but not substantially different. “So I think this is a reasonable proxy for how things are changing over time.”
The national data show some similarities, he says, and some differences. “The similarities are that land values have risen faster than rents over the last 10 years. But pasture values at the national level saw the biggest growth in the early part of this time period [prior to the recession]; and in Kansas, the fast growth has been in recent times.”