Fueled by continued strong demand, farmland prices rose an average of 7% in northeast Nebraska during the past year, according to a University of Nebraska-Lincoln (UNL) official.
The preliminary figures from the annual UNL survey indicate a continued strong interest in farmland, agricultural economist Jim Jansen said in a recent webinar.
The average for all farmland in northeast Nebraska — which includes neighboring Knox, Cedar and Dixon counties — stands at $5,765 per acre. The figure can vary greatly for different types of soil and land usage.
“We’re stating a market value at a point in time,” Jansen said, noting the 7% hike comes from a comparison of Feb. 1, 2020, and Feb. 1, 2021.
The preliminary estimates are released the second week in March, while the final figures are released in June.
The higher land values seem to indicate good news, but they can also signal some concerns down the road, Jansen said. At the least, it makes decision making more difficult for a number of parties.
“We would like to see a gradual change over time. When we see sudden changes (in land values), we get into economic issues,” he said. “If you’re a stakeholder and a policy maker, you need to adjust for these things. So, where are we going?”
The question becomes even more complicated during a pandemic, struggling economy, trade wars and supply-chain issues — all at the same time.
“We can’t be sure how much prices can fluctuate, as we are in a state of uncommon flux,” he said.
Farmland values have remained strong in the Husker State, Jansen said. Despite the number of uncertain factors, land prices have continued to raise or at least remain stable, he said.
For farmland values, the state is divided into regions. UNL has conducted the land study for decades, but current comparisons are based on 2020 prices.
Nebraska contains unique geography that varies greatly across the state, Jansen said. The 93 counties contain 45 million acres of ag land, with precipitation ranging from 30 inches annually in Richardson County to 12-14 inches in Dawes and Box Butte counties.
“We have more irrigated crop land than anywhere else in the United States,” he said. “Half of the ground in our state is either hay land or grazing land which is used for support of the cow-calf and beef sector.”
The center pivot irrigated crop land is the highest priced land as reported in the survey, Jansen said. “As commodities go up, you see more interest in some other land classes as part of the real estate survey,” he added.
Nebraska has seen an overall land value increase of 8-9% during the past two years, Jansen said. The farmland values were affected by the price of renewable energy, drought, some very high commodity prices and some high prices in the meat sector, he said.
Two factors — interest rates and federal assistance during the pandemic — are currently driving land values, Jansen said. Those factors influence earnings to assets and paying off debt, he added.
“You see the home loans and mortgages are at some of the lowest rates in history,” he said. “Last year, the interest rates to finance a 20- or 30-year ag land loan ranged from 3.25% to 3.5%, or well under 3%.”
The lower interest rates become capitalized into the market value of the asset, Jansen said. “If you’re looking for a home or land, you can afford to pay more for it when you have lower interest rates rather than the higher interest rates,” he said.
In addition, disaster assistance tied to the pandemic has affected the Nebraska crop and beef sectors, Jansen said. The U.S. Department of Agriculture has implemented the Coronavirus Food Assistance Program (CFAP) through the CARES Act. The CFAP is targeted for producers of agricultural commodities marketed in 2020 who faced market disruptions because of COVID-19.
A total of $16 billion for the program comes from two sources: $6.5 billion already appropriated through existing Commodity Credit Corporation (CCC) funding and an additional $9.5 billion from the CFAP.
U.S. Agriculture Secretary Tom Vilsack announced last week the expansion of the CFAP. “This is part of a larger initiative to improve USDA pandemic assistance to producers,” the agency’s website said.
The USDA’s Farm Service Agency will accept new and modified CFAP 2 applications beginning April 5.
Land values will continue to be influenced by the very low interest rates, fairly high degree of USDA assistance and the markets for the state’s largest crops and livestock market, Jansen said.
“Now, what will things look like in the future?” he asked. “Where do you anticipate things going?”
ON THE HOME FRONT
Cedar, Knox and Dixon counties in northeast Nebraska are seeing trends similar to those found across the state. While the farm land prices aren’t surging as in past years, the prices remain stable and even increasing, according to the county assessors.
• Cedar County Assessor Don Hoesing previously noted that farmland values had soared because of unusually high demand and the willingness for buyers to pay higher amounts.
However, those prices have come down starting about two years ago, he said.
“Land values did see some decreases, especially on the less productive soils. The prices probably dropped off $2,000 per acre, or 20-25%,” he said. “This last year, we have seen those sales increase again, from the low of around $5,500 per acre back to $6,500 or so for the dry land. The irrigated land would show about $6,000 at the lows and (is) now back up to $6,500 to $7000 per acre.”
Cedar County doesn’t have many grass land sales, but those sales indicate a range of $3,200 to $4,000 per acre for good grass or pasture land, Hoesing said. The county’s land values show a difference of about 25% higher on irrigated over dryland, and dryland brings a value double that of grassland.
• Knox County Assessor Monica McManigal noted three unique market areas in her county. “Prices have remained quite steady from the surge of values of years past,” she said.
The southeastern and eastern townships have shown a slight decline this year, McManigal said. “It’s indicative of the Cedar County declines seemingly slowly moving west,” she added
Irrigated land sells approximately 13% higher than dryland, the assessor said. The irrigated land values range from about $4,000 to $7,700 an acre, while the dryland sells for approximately $4,000 to $6,800 an acre.
The lower-quality grassland sells for around $2,000-2,500 an acre.
“The western portion of Knox County has been holding steady for the past several years,” she said. The cropland sells for about double the grassland, she noted.
Irrigated land sells for around $4,000 to $5,600 an acre, while dryland sells for about $2,570 to $3,665. Grassland goes for approximately $2,000 an acre.
“A new challenge is a slight surge in grass selling for $2500-3,700, seemingly recreational factors,” she said. “These sales are not included with the ag land statistical studies.
The long-term future of land values depends on the owners and their plans for the property, McManigal said. She didn’t single out any particular location, but land along Lewis and Clark Lake in northern Knox County has remained popular for both summer property and year-round usage.
“We have seen speculation by certain buyers, and many families continue to hand down to the next generation,” she said. “In the years when valuations were declining, we didn’t seem to notice in Knox County. This included residential and agricultural property. The residential sales continue to skyrocket.”
• Dixon County Assessor Amy Watchorn said her county has experienced skyrocketing land prices in recent years. In Nebraska, ag land value is based on a three-year average of sales.
“Our market in Dixon County saw large increases from 2007-2015. Some of those increases were as much as 36% on some classifications of land,” she said. “During that time, I had some irrigated sales at $10,000 an acre in the southern part of the county and some dryland sales at $8,000 an acre, which was pretty unheard of for here.”
Dixon County sale prices usually lag one to two years behind surrounding counties, Watchorn said. “Our market just seems to take a little longer to increase,” she said.
In 2015, Dixon County saw some of its land prices drop 5% to 15% and then start to level in 2019. The number of ag land sales has also varied, from 59 sales in 2015 to 31 sales in 2017 and 46 sales in 2020.
Based on current sale prices, irrigated land averages about $6,300 an acre with dryland averaging about $5,000 an acre. Grassland sells for around $2,000.
“The current market is still showing the sales prices to be level but with the slightest increase in prices being paid,” the assessor said. “(It’s) nothing dramatic, but not dropping in price.”
Regardless of the price, Hoesing expects land will remain in demand.
“Even with fluctuating market and livestock prices, land always has been a pretty good investment. The average return has been much better than some investments,” he said.
“One big reason … is that the supply can’t be increased. It’s just not possible to manufacture more land.”
More information can be found on the UNL website. To contact Jansen, email him at Jjansen4@unl.edu.
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