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The 2005 Kentucky Land Outlook

The 2005 Kentucky Land Outlook. Prepared for Economic Subject Matter Meetings October 17-21, 2005 By Richard L. Trimble and Craig D. Gibson Extension Farm Management Specialists. Agricultural Economics.

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The 2005 Kentucky Land Outlook

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  1. The 2005 Kentucky Land Outlook Prepared for Economic Subject Matter Meetings October 17-21, 2005 By Richard L. Trimble and Craig D. Gibson Extension Farm Management Specialists Agricultural Economics

  2. Chart 1. Average Per Acre Value of Farm Real Estate, Kentucky and 48 States, 1912-2005. Source: University of Missouri: http://agebb.missouri.edu/mgt/bull10b.htm. Agricultural Economics

  3. Chart 2. Historical Land Values, US and Kentucky, 1961-2005. Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  4. 2004 Land Value Increases Widespread • Average value of farm real estate across 48 United States was $1,510 per acre as of January 1, 2005 • Increase of $150 or 11.0% over 2004 value • Largest dollar increase ever recorded • Largest percentage increase since 1981 Agricultural Economics

  5. Kentucky 2005 Real Estate Values • Average value of Kentucky farm real estate was $2,200 per acre as of January 1, 2005 • Increase of $200 or 10.0% over 2004 value • Largest dollar increase ever • Largest percentage increase since 1980 Agricultural Economics

  6. Positive Influences on Value Increases • Low interest rates • Good commodity yields • Good commodity prices • Strong non-agricultural demand for farm land Agricultural Economics

  7. Chart 3. Average Per Acre Value of Farm Real Estate, Kentucky and Surrounding States, 1998-2005. Source: National Agricultural Statistics Service, USDA, Washington, D.C. Agricultural Economics

  8. Chart 4. Average Price, per acre, of Kentucky Agricultural Land, October, 2004 Source: Survey of participants in ESM Meetings, October, 2004 Agricultural Economics

  9. Chart 5. Crop Land Cash Rental Rates, per acre, Kentucky and Surrounding States, 2001-2005 Source: National Agricultural Statistics Service, USDA, Washington, D.C. Agricultural Economics

  10. Chart 6. Crop Land Cash Rent as Percent of Value, Kentucky and Surrounding States, 2001-2005 Source: National Agricultural Statistics Service, USDA, Washington, D.C. Agricultural Economics

  11. Chart 7. Typical Kentucky Crop and Pasture Land Cash Rental Rate, per acre, October, 2004 Source: Survey of participants in ESM Meetings, October, 2004 Agricultural Economics

  12. Outlook Potential Positive Influences • Low interest rates • Good commodity yields • Good commodity prices • Strong non-agricultural demand for farm land Agricultural Economics

  13. Upward Trend in Farmland ValuesWarrants Caution • Rising interest rates • Lower commodity prices • Increasing energy costs • National budget constrains limiting government program payment support • Potential flagging non-agricultural demand Agricultural Economics

  14. Chart 8. Corn and Soybean Gross Income as a Percent of Land Value Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  15. Chart 9. Corn, Soybeans, and Government Payments as a Percent of Land Values, 1970-2005. Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  16. Chart 10. Cash Rent as a Percent of Land Value Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  17. Chart 11. Cash Rent as a percent of Land Values vs 10-Year Bond Rates, 1977-2005. Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  18. Chart 12. U.S. Land Values vs. Yearly Average of Dow Jones Industrials Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  19. Chart 13. U.S. Land Values Compared to the Prime Interest Rate 1975 1980 1985 1990 1995 2000 2005 Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  20. Chart 14. Government Payments per Acre – KFBM Program Land Value per Acre Source: Craig D. Gibson, Unpublished data analysis. Agricultural Economics

  21. What Do You Think Will Happen??? • Strong Kentucky land value increases will continue • Kentucky land values will decrease for first time since 1991 • The upward trend in Kentucky land values will continue, but at a more moderate rate Agricultural Economics

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