Nebraska Ag Land Values Down 4%; Rental Rates Down 2-10%
The average for Nebraska agricultural land values has declined by about 4% in the last year according to preliminary findings from the University of Nebraska–Lincoln Farm Real Estate Market Survey. This decline marks the second consecutive year of lower weighted average farmland values in Nebraska.
The statewide all-land average value for the year ending Feb. 1 was $3,135 per acre, down $115 per acre from 2015. Average farmland values for the eight districts and the percentage decrease from 2015 were: northwest, $820 (-5%); north, $1,270 (-5%); northeast, $6,095 (-1%); central, $3,780 (-4%); east, $7,025 (-1%); southeast, $5,685 (-5%); south, $4,140 (-10%); and southwest, $2,010 (-3%).
The largest price decline by land class occurred in the hayland category which declined 17%. The reverberating effects of the 2012 drought and resulting increase in demand for forages to feed cattle led producers to increase their willingness to bid up the price of hayland through 2015. Some of the highest rates of decline for hayland were noted in the major cow-calf producing regions of the state including the northwest and north districts.
Gravity-irrigated and center pivot-irrigated cropland reported the next highest rates of decline, about 6% and 4% respectively across Nebraska. Dryland cropland with irrigation potential followed a similar trend.
The decline comes as producers across Nebraska faced lower prices for crops and livestock. Lower values have resulted in tighter margins for servicing rent or debt payments. Survey participants indicated that financially sound market participants still have the ability to secure long-term financing at favorable fixed interest rates, but meeting annual debt payments on newly purchased property with lower commodity prices remains a challenge.
Dryland cropland without irrigation potential or tillable grazing land noted small price increases across Nebraska in 2016, but these may be noted as a relatively unchanged market for this land class.
Rental rates for dryland and irrigated cropland declined from 2% to 10% across Nebraska. Districts in western Nebraska reported higher rates of decline than the eastern districts. Grazing land and cow-calf pair rental rates followed suit as cattle prices and future cattle price expectations have retreated from the record highs of 2014. Rates of decline were higher for regions that had record rent levels in 2015.
The average monthly rental rate for a five-month grazing season averaged about $55 per month or $275 for the grazing season. Survey respondents noted the differences in the rental rate ranges reported across the state may be attributed to the level of service that the landlord provides to the tenant as part of the lease.
Rental rates for agricultural ground in Nebraska peaked in 2014 and 2015 for cropland and grazing land, respectively. As the value of commodities declines, tenants face tighter financial margins. Landlords in Nebraska have faced higher landownership expenses as property taxes have continued to rise. Survey participants noted the dynamics involved in negotiations on rental rates typically have centered on these concerns.
The preliminary report can be found at agecon.unl.edu/cornhuskereconomics.
Land values and rental rates presented in the 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. Preliminary land values and rental rates are subject to change as additional surveys are returned. Final results from the survey will be published in early June 2016 and will be available online at agecon.unl.edu/realestate.html.
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 UNL Department of Agricultural Economics at 402-472-3401 or firstname.lastname@example.org.