Farms, ranches see an increase in value for land

Jack Money The Oklahoman
The average value of crop or ranch lands in Oklahoma increased by 8 percent between 2014 and 2015. Oklahoma State University

OKLAHOMA CITY (TNS) — Oklahoma’s rural lands aren’t exactly a gold mine for their owners.

But in a year-over-year comparison, the value of those lands in 2015 increased and, at least near Oklahoma City, don’t appear to have dropped much if at all in 2016, researchers and local agricultural experts have reported.

Between 2014 and 2015, the average value of an acre of crop or ranch lands in the Sooner state increased by 8 percent — the largest jump seen among seven states that are served by the Federal Reserve Bank of Kansas City, a 2016 research paper written by a bank economist shows.

Values for crop and ranch land in the other states served by the Kansas City branch of the Federal Reserve during that time period either were flat or fell, except for in Colorado.

In dollars, the average value of an acre of crop or ranch land in Oklahoma in 2015 was $1,620, on the lower end of a range that went from $1,370 in Wyoming to $5,070 in Nebraska.

Cortney Cowley, the Federal Reserve Bank of Kansas City economist who researched the issue, and other agricultural experts in Oklahoma attributed the value increase for Oklahoma landowners to:

• A red-hot cattle market in 2014

• The ongoing effort to produce oil and gas from northern, northwestern, western and southwestern parts of the state

• Continued growth from the Oklahoma City and Tulsa metropolitan areas

• And the leasing of rural lands for recreational activities, such as hunting

Surging commodity prices

As part of her research, Cowley said bankers told her that rural farmers in Oklahoma benefited from a combination of good cattle prices and cash generated by higher oil and gas prices before they began to fall in late 2014.

“At the same time, the demand for farmland remained pretty high while supply was still low, so there weren’t a lot of properties up for sale,” she said, adding that when properties were selling, there was competition for those.

Damona Doye, a farm management professor at Oklahoma State University, said Cowley’s research dovetails with what researchers there have seen.

Rural land prices in Oklahoma are impacted by the cattle market, and she said in 2014, “we had absolutely off-the-chart, high record profits for the beef sector, particularly the cow/calf operations.

“That would have helped maintain Oklahoma’s pasture prices,” Doye said.

As for the impact high energy prices in 2014 had on rural land values in Oklahoma, Doye said that likely played a role.

“It is hard to quantify, because often, royalties are owned separately from the land,” she said, “but we know it matters.”

Bankers were telling OSU researchers they weren’t seeing traditional activity during the recent boom, Doye said.

“Bankers were telling us (customers) weren’t borrowing because they had cash from royalty payments. They were using their oil and gas income to buy equipment, fund their operations and in some cases, to buy additional land,” she said.

Another impact, too, Doye said, is the seemingly ever-increasing potential to convert land historically used for agricultural purposes into nonagricultural uses like commercial or residential developments.

That’s particularly true in the Oklahoma City area.

Urban sprawl plays role

Kyle Worthington, an educator at Oklahoma State University’s Canadian County Cooperative Extension Service, said he has no doubt continued urbanization of outlying areas impacts crop and range land prices.

“People are getting more willing to commute,” Worthington said.

In eastern Canadian County, he said, pressure from ongoing housing and commercial developments is pushing land prices markedly higher.

Worthington said a five-acre tract next to land he owns recently was bought for $75,000, adding that’s not an uncommon price.

In central parts of Canadian County, land is selling for about $11,000 an acre, while between there and Oklahoma City, it is selling for a lot more.

Prices also are increasing on Canadian County’s western side as sellers take their cash and look to buy additional land elsewhere, Worthington said.

While Worthington said his observations don’t necessarily translate to what’s happening across the state, he did say it’s likely rural landowners in other counties surrounding the metropolitan Oklahoma City area are seeing the same effect.

Looking ahead

Predicting where Oklahoma’s rural land values might trend in coming years certainly isn’t an exact science.

But, regionally, Doye said The state’s rural land values appear to be somewhat stable.

Doye noted that per-acre prices for agricultural lands during recent years increased significantly in states like Nebraska, where lots of corn is produced and used for end products such as ethanol.

“I don’t think our land prices have been bid up as much as theirs were, so they’ve held their own a bit, because they haven’t had to come down as much.”

And, while Oklahoma’s oil, natural gas and cattle commodity markets were down in 2016, those factors had no real impact in Canadian County, Worthington said.

“We just haven’t seen that translate to land values yet,” he said.

Generally, Worthington said he expects to see the continued erosion of the amount of acreage used in the state for agricultural purposes.

He noted that at one time, Oklahoma County had an active Cattlemen’s association that had about 200 members. That association no longer exists.

“There are still some small farming and ranching operations around, but urban sprawl has eaten up a significant amount of production” in the area, he said.

“Urban sprawl is pushing out in all directions. You can see that all the way up and down Interstate 35, from Wichita, Kansas to the Red River,” he said. “Just follow the interstates, and you can see that development.

“Even though Oklahoma is still somewhat a rural state, we are seeing that urban pressure eating our natural resources.”

Worthington said as part of Leadership Oklahoma’s 2004 class, he and other members studied how urban growth impacted agricultural lands in Poland, and noted they saw the same thing happening there.

Ultimately, civic leaders in most European countries prohibited development of urban projects outside of established city limits, and he predicted the same action might happen in the United States, one day.

“Throughout Europe, they have protected their natural resources,” he said. “I don’t know if we will see it here during my lifetime, but it’s something we need to do.

“We need those acres, not just to feed America, but to feed the world.”