2017 Trends in Nebraska Farmland Markets

Cornhusker Economics March 15, 20172017 Trends in Nebraska Farmland Markets: Declining Agricultural Land Values and Rental Rates

The final 2017 report is now available here.



Preliminary findings from the 2017 Nebraska Farm Real Estate Market Survey conducted by the University of Nebraska–Lincoln, indicate that as of February 1, 2017, the weighted average farmland value declined by about 10 percent over the prior 12-month period to $2,805 per acre (Figure 1 and Table 1). This decline marks the third year of consecutive downward pressure totaling to approximately 15 percent for the weighted average farmland value in Nebraska which peaked in 2014 at $3,315 per acre.

According to survey participants, since February 2016 the largest price declines by land classes in Nebraska occurred in the dryland cropland with irrigation potential at 13 percent followed by tillable grazing land at 12 percent. During periods of higher commodity prices, producers gain the economic incentive to develop these land classes to produce higher yields through irrigation or production of crops. The current sustained period of lower commodity prices and the anticipation of these lower values indicated by survey participants as major forces leading to the declines. Regulatory policies guiding further development of dryland cropland with irrigation potential were also noted as a negative force on this land class.

Dryland cropland without irrigation potential and nontillable grazing land reported the next highest rate of decline at about 10 percent across Nebraska. The sharpest rates of decline for dryland cropland without irrigation potential were noted in the Central, Southwest, and South Districts at about 15 percent. These Districts tend to be some of the major winter wheat producing regions of the state and this small grain experienced exceptionally low commodity prices during 2016. Suppressed prices for wheat might have led to reverberating effects through the local land markets. The high rates of decline, ranging from 13 to 18 percent, reported for the Central, East, and Southwest Districts were for nontillable grazing land or part of the major land base serving the cow-calf industry. Hayland also noted similar rates of decline for the Northwest and Central Districts.

Across Nebraska gravity irrigated and center pivot irrigated cropland reported rates of decline ranging between 6 and 4 percent, respectively. Center pivot irrigated cropland in the Northwest, Southwest, and Southeast dropped 13 to 16 percent, whereas the other Districts recorded declines around 5 to 7 percent. Gravity irrigated cropland in the Northwest and Southeast Districts followed similar double-digit deteriorations. Survey participants expressed the availability of water for irrigation and policies guiding the utilization of this resource as potentially negative forces in the market value of these two land classes into the future. Technological advancements in the application of irrigation water might be able to enhance the utilization of these resources and offset potential challenges.

Rental rates for agricultural land in Nebraska declined for another year as commodity prices for the major commodities raised across the state experienced an additional year of lower prices (Table 2). Agricultural land ownership expenses remain high as property tax levels continued to rise on average across the state. Negotiating an equitable rental rate remains a challenge for landlords and tenants. For the second year in a row, survey participants noted this dynamic in negotiating rental rates centered on these concerns.

Irrigated cropland rental rates on average declined between 5 and 10 percent across Nebraska. The eastern regions of Nebraska including the Northeast, East, and Southeast Districts along with the Southwest District recorded the highest rate of decline ranging from 9 to 12 percent for center pivot irrigated cropland. In prior survey years, the eastern regions of the state recorded the most substantial increases along with the highest rental rates. These rates were hard to maintain with lower grain prices. The average for the low and high third quality of land also reported a substantial drop in the eastern third of the state (Table 2).

Pasture and cow-calf pair rental rates fell 5 to 15 percent across Nebraska depending upon the region of the state. The strongest rate of declines was in the regions of the state noting the highest grazing land or cow-calf rental rates over the past several years. These regions include the Northeast, East, and Southeast Districts where on average rental rates dropped 10 to 15 percent. The other major grazing regions of Nebraska noted falling rental rates closer to 5 percent. Several other considerations, besides the productivity of the grazing land, factor into the rental rates paid across Nebraska according to survey participants. These factors may include things such as who maintains fencing around the property or has the responsibility of weed control. Depending upon the capacity of each individual involved as part of the rental agreement, the level of services either party provides as part of the contract might vary and influence the rental rate negotiated.

Survey results shown and discussed in this report are preliminary findings from the University of Nebraska–Lincoln 2017 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 June 2017 and will be available online via the Nebraska Farm Real Estate website. 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 contact Linda Tesch by phone: 402-472-3401 or email: ltesch1@unl.edu

2017 preliminary results by district

Districts by county

Table 1. Average Reported Value of Nebraska Farmland for Different Land Types by Agricultural Statistics District, February 1, 2017a
Type of LandNorthwestNorthNortheastCentralEastSouthwestSouthSoutheastStatec
Dryland Cropland (No Irrigation Potential)
$/acre 715 1,560 5,405 2,750 5,775 1,660 3,080 4,225 3,130
% change -4 -4 -6 -15 -9 -15 -14 -13 -10
Dryland Cropland (Irrigation Potential)
$/acre 765 2,105 5,845 3,140 6,340 1,610 4,125 5,355 4,180
% change -3 -2 -13 -18 -12 -11 -4 -17 -13
Grazing Land (Tillable)
$/acre 535 1,180 3,265 2,150 3,585 940 2,095 2,825 1,320
% change -5 -11 -17 -13 -18 -12 -6 -12 -12
Grazing Land (Nontillable)
$/acre 440 710 2,225 1,585 2,325 800 1,485 2,110 880
% change -8 -4 -10 -18 -17 -13 -12 -4 -10
Hayland
$/acre 785 1,410 3,185 2,150 3,090 1,535 2,200 2,680 1,820
% change -12 -3 -7 -17 -3 -10 -6 -4 -7
Gravity Irrigated Cropland
$/acre 2,650 3,740 7,000 6,240 7,800 4,155 6,095 6,410 6,120
% change -11 -6 -3 -5 -4 -5 -3 -13 -6
Center Pivot Irrigated Croplandb
$/acre 2,870 4,180 7,395 6,975 8,555 4,610 6,725 7,720 6,290
% change -13 -4 -6 -7 -9 -14 -7 -16 -9
All Land Averagec
$/acre 775 1,180 5,410 3,360 6,330 1,720 3,985 4,840 2,805
% change -8 -5 -10 -11 -9 -12 -6 -15 -10
Source: a UNL Nebraska Farm Real Estate Market Surveys, 2016 and 2017.
b Value of pivot not included in per acre value.
c Weighted averages.


Table 2. Reported Cash Rental Rates for Various Types of Nebraska Farmland and Pasture: 2017 Averages, Percent Change from 2016 and Quality Ranges by Agricultural Statistics Districta
Type of LandNorthwestNorthNortheastCentralEastSouthwestSouthSoutheast
-------------------dollars per acre-----------------------
Dryland Cropland
Average 29 56 215 89 190 40 74 155
% Change -9 -7 -4 -7 -5 -5 -8 -6
High Third Quality 40 68 260 115 225 59 120 200
Low Third Quality 22 46 175 72 155 27 58 130
Gravity Irrigated Cropland
Average 120 165 250 220 265 170 205 235
% Change -4 -6 -9 -4 -7 -6 -5 -6
High Third Quality 145 190 290 255 320 210 255 275
Low Third Quality 100 140 210 190 235 130 170 200
Center Pivot Irrigated Croplandb
Average 155 210 305 230 290 200 225 265
% Change -9 -5 -12 -4 -9 -11 -6 -9
High Third Quality 195 235 350 275 335 255 275 315
Low Third Quality 125 160 245 215 250 180 195 225
Pasture
Average 11 25 62 34 53 22 35 49
% Change -8 -4 -17 -6 -14 -8 -5 -10
High Third Quality 21 38 75 48 73 32 46 68
Low Third Quality 7 16 41 30 38 19 23 33
------------------Dollars per month----------------------
Cow-Calf Pair Ratesc
Average 35.15 61.2 53.15 55.15 51.2 53.7 47.3 48.78
% Change -3 -4 -11 -5 -9 -6 -4 -6
High Third Quality 47.95 75.9 68.3 67.65 70.45 61.8 58.35 65.45
Low Third Quality 25.65 47.5 42.8 42.25 44.55 41.65 39.15 41.45
Source: a Reporters’ estimated cash rental rates (both averages and ranges) from the UNL Nebraska Farm Real Estate Market Survey, 2016 and 2017.
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.

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Jim Jansen
Agricultural Systems Economist
Nebraska Extension
University of Nebraska-Lincoln
jjansen4@unl.edu
402-261-7572

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