Trends in Nebraska Farmland Values and Rental Rates Reflect Changes in Agricultural Commodity Prices


Cornhusker Economics March 4, 2015

2015 Trends in Nebraska Farmland Values and Rental Rates Reflect Changes in Agricultural Commodity Prices

Trends in agricultural commodities across Nebraska from 2014 leading into 2015 were marked by record-setting cattle markets along with lower grain and oilseed prices. Movements in the value and rents of the types of land which support these commodities reflect their general price trends. Preliminary findings from the 2015 University of Nebraska-Lincoln Nebraska Farm Real Estate Market Survey indicate as of February 1, 2015, the weighted average farmland value declined by about 3 percent over the prior 12-month period to $3,210 per acre (Figure 1 and Table 1). The decline in weighted average farmland values in Nebraska denotes the first decline in recent years of the survey.

Figure 1. Average Value of Nebraska Farmland, February 1, 2015 and Percent Change from a Year Earlier. Preliminary

 

Table 1. Preliminary Average Reported Value of Nebraska Farmland for Different Land Types and Sub-State Regions, February 1, 2015 a

Table 1. Average Reported Value of Nebraska Farmland for Different Land Types and Sub-State Regions, February 1, 2015a Preliminary
Source:
a UNL Nebraska Farm Real Estate Market Surveys, 2014 and 2015.
b Value of pivot not included in per acre value.
c Weighted averages.

Surveyed 2015 cash rental rates for dryland cropland in Nebraska on average declined about 10 percent (Table 2). Dryland cropland on average had a stronger rate of decline compared to center pivot and gravity irrigated crop ground. According to survey participants, pasture and cow-calf pair rental rates increased about 15 percent across the state due to higher cattle prices and drought assistance provided by the Livestock Forage Disaster Program (LFP). 

Table 2. Preliminary Reported Cash Rental Rates for Various Types of Nebraska Farmland and Pasture: 2015 Averages, Percent Change from 2014 and Quality Ranges by Agricultural Statistics District a

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Source:
a Reporters' estimated cash rental rates (both averages and ranges) from the UNL Nebraska Farm Real Estate Market Survey, 2015.
b Cash rents on center pivot land assumes landowners own total irrigation system.
c A cow-calf pair is typically considered to be 1.25 to 1.30 animal units (animal unit being 1,000 lb. animal) for a five month grazing season. However, this can vary depending on weight of cow and age of calf.

Since February 1, 2014 the largest price decline at about 10 percent by land class in Nebraska reported by survey participants occurred in the dryland cropland category. Declines reported in land values for these categories varied across the state with the strongest decline reported for dryland cropland (no irrigation potential) in the Northwest District, with the smallest rates of decline for dryland cropland (irrigation potential) in the North and Southeast Districts at 5 percent each. Bearish comments reported by survey participants  indicated lower expected grain and oil-oilseed prices lead to the lower trends in dryland crop- land values in Nebraska.

Gravity irrigated and center pivot irrigated cropland reported a decline of about 3 percent across the state. Survey respondents attributed the lower rates of decline for irrigated land classes due to generally higher and more consistent irrigated crop yields compared to the dryland counterparts. The sharpest decline in the two irrigated land classes were reported in the Central District at about 14 percent along with slight decreases reported in the Northeast, East, and Southeast Districts. Major cow-calf producing regions of Nebraska including the Northwest and Southwest Districts reported small increases of about 10 percent. These increases may have been supported by record setting profits in the cow-calf industry from 2014 leading into 2015.

Agricultural land which directly supports the cow-calf industry in Nebraska includes grazing land (tillable), grazing land (nontillable), and hayland witnessed increases ranging from small to moderate in land values. Grazing land across Nebraska increased at a rate of about 10 percent, while hayland rose 20 percent.  The hayland class proves to be a critical component of forage production for the state with the strongest increases being recorded in the Northeast and Central Districts.

Survey participants indicated that lower grain prices will likely continue into 2015 leading to lower reported  cash rental  rates for  dryland and  irrigated cropland in Nebraska. Declines in dryland and irrigated cropland rental rates averaged about 10 percent. A few cases may be noted in the Northeast and Central Districts where dryland and irrigated rental rates have increased slightly. For the majority of the districts, cropland rental rates for irrigated and dryland cropland have declined 5 to 15 percent. Survey participants also noted a small uptick in the utilization of flexible cash lease arrangements for cropland in Nebraska, but cash leases in the eastern part of the state and crop share leases in the western part of the state continue to be the preferred method for leasing agricultural property.

Pasture and cow-calf pair rental rates continued to set new records for 2015 which raised concerns regarding ranch cash flows by some land management professionals participating in the survey. Per-acre rental rates reported an average increase of about 15 percent with the Central, Northeast, and Southwest Districts reporting the highest percent increases over 2014. Cow-calf pair rental rates across Nebraska for a 5 month grazing season in 2015 average about $50 per month or $250 for the season. A high of $75 per pair for each month of the grazing season was reported in the Northeast District along with a low of $25.60 per pair in the Northwest District. 

Survey results shown and discussed in this report are preliminary findings from the University of Nebraska-Lincoln 2015 Nebraska Farm Real Estate Market Survey. Land values and rental rates presented in this report are averages of survey participants' responses by district. Actual land values and rental rates may vary depending upon the quality of the parcel and local market for an area. Also, preliminary land values and rental rates are subject to change as additional surveys are returned. Final results from the survey will be published in the first week of June 2015 and will be available on Nebraska Farm Real Estate website: realestate

Land appraisers, farm managers, or agricultural finance professionals from Nebraska interested in participating in future Nebraska Farm Real Estate Market Surveys are invited to contact the Department of Agricultural Economics at the University of Nebraska-Lincoln. Interested parties can directly contact Jane Witte by phone: (402) 472-1913 or email: janewitte@unl.edu

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Jim Jansen, (402) 254-6821
Nebraska Extension
jjansen4@unl.edu

Roger Wilson
Dept. of Agricultural Economics
University of Nebraska-Lincoln
rwilson6@unl.edu

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