The value of Texas agricultural land has followed national trends since the early 1990s. Last year, however, the state's average price per acre remained unchanged, a sharp contrast to the nation's first decline in 17 years. Texas was one of only eight states that didn't see falling farm values in 2008.Farms - Valuation ; Agriculture - Economic aspects

Emily Kerr

Keith R. Phillips

English

Research Papers in Economics

SpotLight
SouthwestEconomy    FEDERAL RESERVE BANK OF DALLAS • FOURTH QUARTER 2009 10
Farm Real Estate Values
Texas Holds Steady in 2008, Bucking U.S. Trend
The value of Texas agricultural land has 
followed  national  trends  since  the  early 
1990s. Last year, however, the state’s aver-
age price per acre remained unchanged, a 
sharp contrast to the nation’s first decline in 
17 years. Texas was one of only eight states 
that didn’t see falling farm values in 2008.
The  most  recent  Department  of  Agri-
culture report shows U.S. farm real estate, 
adjusted for inflation, was worth an average 
of $2,100 an acre in 2008, down 3.2 percent 
from the previous year (Chart 1). Farm real 
estate values include land and buildings.
The average value of Texas agricultural 
land remained at $1,550 an acre in 2008. Texas 
trails the nation because much of its farmland 
is arid with poor soil, so it can’t match other 
states’ crop yields. Some states, like California, 
have good growing conditions for high-value 
permanent crops like fruits and nuts.
Nearly 80 percent of Texas’ land is de-
voted to agriculture. Pastureland accounts for 
two-thirds of the total, supporting a livestock 
industry that ranked No. 1 in the nation with 
more than $10.5 billion in sales in 2007. Crop-
land takes up most of the rest of Texas’ rural 
acreage, with corn, cotton and hay—the top 
three  crops—combining  for  production  of 
more than $3.3 billion in 2008. Texas trails only 
California in total agricultural production.
Several factors most likely contributed 
to the resiliency of Texas farm values in 2008. 
First, the Texas economy performed better 
than the national average, and it wasn’t hurt 
as badly by a residential real estate crisis that 
elsewhere slowed the conversion of farm-
land into nonagricultural development. 
Second, prices for Texas’ most impor-
tant  agricultural  products  have  held  up 
better than the prices for the leading farm 
products  in  other  states.  Livestock  prices 
remained  steady  in  2008  and  grain  prices 
increased,  supporting  land  values  by  pro-
viding healthy incomes for Texas ranchers 
and  farmers  (Chart  2).  Meanwhile,  prices 
dropped for dairy products and vegetables, 
harming the farm sectors in states heavily in-
vested in those commodities.
Hunters a Plus
A third factor bolstering farm real estate 
values arises from Texans’ passion for hunting, 
a source of lucrative lease income for many 
landowners. From 1996 to 2006, the number of 
hunters fell 10 percent nationally but rose 21 
percent in Texas, according to a U.S. Fish and 
Wildlife Service survey. Over the decade, spend-
ing by Texas hunters increased 22 percent. 
Federal Reserve Bank of Kansas City re-
search found that for each 4 percent increase 
in hunting lease rates, Texas land values rise 
1 percent. In comparison, livestock receipt 
increases of the same magnitude lead to a 
0.56  percent  increase  in  land  values.  For 
crop receipts, the gain is only 0.11 percent.
Looking ahead, it’s likely that farmland 
values will be flat to slightly down this year. 
Several factors are putting downward pres-
sure  on  land  values—a  sharp  weakening 
of the Texas economy, tighter credit condi-
tions, weaker commodity prices and severe 
drought conditions in much of the state.
The Dallas Fed’s third quarter agricul-
tural survey found that farmland sales con-
tinued to weaken. More than a third of ag-
ricultural lenders responding to the survey 
expected a continued decline in farm real 
estate  loans  in  the  near  term. “The  trend 
in  farmland  prices  remains  negative,  with 
nearly all respondents expecting either no 
change or a decline in farmland values over 
the next three months,” the survey reported.
— Emily Kerr and Keith R. Phillips
Chart 1
Texas Farmland Values Flat in 2008
2008 dollars per acre
0
500
1,000
1,500
2,000
2,500
’08 ’06 ’04 ’02 ’00 ’98 ’96 ’94 ’92 ’90
Texas
U.S.
Farm real estate values
SOURCE: U.S. Department of Agriculture.
Chart 2
Rising Agricultural Prices Support Texas Land Values
Indexes, 1990–92 = 100
50
100
150
200
250
300
2008 2007 2006 2005 2004 2003 2002 2001 2000
Meat animals
Poultry and eggs
Food grains
Cotton
Feed grains and hay
Oil-bearing crops
Leading Texas commodities
Prices received by farmers
SOURCE: U.S. Department of Agriculture.

Spotlight: Farm real estate values: Texas holds steady in 2008, bucking U.S. trend

http://dallasfed.org/assets/documents/research/swe/2009/swe0904d.pdf

Spotlight: Farm real estate values: Texas holds steady in 2008, bucking U.S. trend

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