Nebraska Farm Real Estate Values Slip 3% in Last Year
March 4, 2015
After five years of increases in Nebraska farmland values, the state average dropped 3%, according to preliminary findings from the University of Nebraska–Lincoln.
The state average farmland value as of Feb. 1, 2015 was $3,210 per acre, down 3% from the 2014 average of $3,315 per acre (Figure 1). Average farmland values in six of the state's eight districts decreased or remained the same. The average land value in the southwest district increased by 4% to $2,055 an acre while the value in the north district increased 7% to $1,300 an acre.
Average farmland values for the other six districts and the percentage decrease from 2014 were: northwest, $855 (0); northeast, $6,320 (-2%); central, $3,995 (-5%); east, $6,570 (-10%); south, $4,785 (-1%); and southeast, $5,875 (-5%).
Generally, grazing and haying land-use categories showed increases while irrigated and dryland cropland showed smaller increases or decreases. The statewide average value for hayland increased 20% from 2014, the highest of any statewide land use category. The state average for non-tillable grazing land increased 12%; tillable grazing land increased 7%.
"Land classes that support the cow-calf industry are improving or holding steady due to a strong return in that market over the last one to two years," said Jim Jansen, UNL Extension Educator and co-author of the Nebraska Farm Real Estate Market Developments survey.
The survey covers the period from Feb. 1, 2014 to Feb. 1, 2015 and is reported in the current Cornhusker Economics, written by Jansen and Roger Wilson, UNL Farm Management Budget Analyst. The article is available online at agecon.unl.edu/cornhuskereconomics. Cornhusker Economics is a publication of the UNL Department of Agricultural Economics.
"Irrigated crop ground classes, including center pivot or gravity-irrigated, did not decline as quickly in value as the dryland categories. Their yields, and similarly their revenues, are not as variable as the dryland acres," Jansen said. "That's why we're still seeing some pretty strong values there."
The state average decrease for gravity-irrigated land was 4% and for center pivot-irrigated land 2%, compared to a 10% decrease for dryland acres with irrigation potential and a 9% decrease for dryland acres with no irrigation potential.
"Bearish comments reported by survey participants indicated lower expected grain and oilseed prices led to the lower tends in dryland cropland values in Nebraska," Jansen wrote.
The higher grazing and hayland prices may reflect the $532.5 million in federal disaster relief that Nebraska livestock growers had received as of Jan. 6, 2015 for 2012-2014 forage losses due to the drought.
"These payments lessened the impact of prior losses and may have provided financial incentive to expand cattle herds and add resources to change the size or scope of an operation," Jansen said.
Comments from survey participants indicated a bullish outlook for classes of land that support the cow-calf industry and a more varied outlook for cropland where expectations were tied to the commodities being raised on the land.
Rental Rates Reflect Real Estate Price Shifts
"Pasture and cow-calf pair rental rates continued to set new records for 2015," the authors reported in Cornhusker Economics.
"Cow-calf pair rental rates across Nebraska for the upcoming five-month grazing season in 2015 average about $50 per month or $250 for the season."
Rates based on cow-calf pairs were lower in the north district, unchanged in the central district, but increased in all other districts, with the southwest, southeast, and south showing the largest increases at 18%, 40%, and 45%, respectively.
Changes in cash rental rates for cropland ranged from an increase of 5% for dryland parcels in central Nebraska to a decrease of 18% for center pivot-irrigated cropland in the southwest district, with most cropland decreasing 5% to 15%.
Land managers voiced concerns about increasing property taxes at a time when commodity prices had dropped and land prices were just starting to fall off, Jansen said.
"Folks are trying to negotiate higher rents while tenants are feeling profit margins starting to decrease due to lower commodity prices, creating a tug-of-war throughout the crop and livestock land classes."
This may be a good year for landlords and tenants to look at the benefits of flexible cash leases, Jansen said. With flexible cash leases, both parties agree to a base rental rate and an additional amount that flexes around crop yield, crop price, or crop revenue (yield times price). Further information is available in the UNL publication, Flexible Cash Leasing of Cropland.
Survey results 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 an average 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 and will be available electronically on the Nebraska Farm Real Estate website 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 can contact the Department of Agricultural Economics at 402-472-3401 or email firstname.lastname@example.org.
The Department of Agricultural Economics and Nebraska Extension are in the UNL Institute of Agriculture and Natural Resources.