Farm Progress

Preliminary findings for 2017 Real Estate Market Survey show the weighted average farmland value declined about 10% from February 2016 to February 2017.

Tyler Harris, Editor

March 24, 2017

4 Min Read
THIRD YEAR OF DECLINE: The weighted average farmland value declined by about 10% from Feb. 1, 2016 to Feb. 1, 2017. This is the third year in a row of declining farmland values in Nebraska and a 15% decline for the weighted average land values since 2014.

The University of Nebraska-Lincoln recently released preliminary findings from the 2017 Nebraska Real Estate Market Survey. According to the survey, as of Feb. 1, 2017, the weighted average farmland value declined by about 10% from Feb. 1, 2016 to $2,805 per acre. The decline marks the third year in a row of declining farmland values — a total of 15% for the weighted average farmland value in Nebraska, which peaked at $3,315 per acre in 2014.

"When we talk about percent change, keep in mind the base value. For example, a 9% decline on $6,290-per-acre, center-pivot-irrigated cropland is a lot bigger change than a10% decline on $3,145-per-acre dryland cropland without irrigation potential," says Jim Jansen, Nebraska Extension educator in northeast Nebraska and the survey's author. "It's not so much about percent changes, but 'What's the bigger picture telling us?' This is the third consecutive year land is down. It peaked on average in 2014. And the rate of decline varies across the state."

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Biggest declines in dryland cropland, tillable grazing land
The biggest declines were in dryland cropland with irrigation potential, which saw a decline of 13%, as well as tillable grazing land, which saw a decline of 12%.

Why the decline? Survey respondents noted lower commodity values and the anticipation of lower commodity prices as major factors leading to declines, in addition to regulatory policies guiding further development of dryland cropland with irrigation potential.

Dryland cropland without irrigation potential and nontillable grazing land reported the next-highest rate of decline, at about 10% 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%. These districts are major winter wheat-producing areas of the state, and exceptionally low wheat prices may have led to reverberating effects through the local land markets.

Other major cropland classes, including gravity and center-pivot-irrigated, saw a decline of 6% and 4%, respectively. However, these rates varied widely across the state. Center-pivot-irrigated cropland in the Northwest, Southwest, and Southeast dropped 13% to 16%, while the other districts recorded declines around 5% to 7%. Factors leading to this decline noted by participants included the availability of water and policies guiding water use.

"One factor that was voiced through different conversations I've had with growers was that the availability of groundwater for irrigation has an influence on the rates that are being paid," says Jansen. "Policy guiding change in available groundwater resources — especially if water is getting short — may have an impact on producers' willingness to bid on land at a land auction."

Drop in rental rates
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.

When it comes to rental rates, there was a higher rate of decline on irrigated cropland than dryland values. "What stood out compared to prior years we saw on irrigated croplands: Some of the rates on a per-acre basis that were the highest, some of the leading areas in the eastern third of the state on irrigated land saw the highest rates of decline on a per-acre basis, especially in the Northeast," says Jansen.

Irrigated cropland rental rates on average declined between 5% and 10% across Nebraska — and 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% for center-pivot-irrigated cropland. Although in previous 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.

Pasture and cow-calf-pair rental rates fell 5% to 15% across Nebraska, depending on the region. These regions include the Northeast, East and Southeast, where on average, rental rates dropped 10% to 15%. The other major grazing regions of Nebraska noted falling rental rates closer to 5%.

"On a per-acre basis for cow-calf pairs, the highest rates of decline were in some of the regions that were the most expensive rates in previous years. They were primarily in the eastern third of the state," Jansen says.

The final results of the Real Estate Market Survey will be released later this summer in mid- to late June.

 

 

About the Author(s)

Tyler Harris

Editor, Wallaces Farmer

Tyler Harris is the editor for Wallaces Farmer. He started at Farm Progress as a field editor, covering Missouri, Kansas and Iowa. Before joining Farm Progress, Tyler got his feet wet covering agriculture and rural issues while attending the University of Iowa, taking any chance he could to get outside the city limits and get on to the farm. This included working for Kalona News, south of Iowa City in the town of Kalona, followed by an internship at Wallaces Farmer in Des Moines after graduation.

Coming from a farm family in southwest Iowa, Tyler is largely interested in how issues impact people at the producer level. True to the reason he started reporting, he loves getting out of town and meeting with producers on the farm, which also gives him a firsthand look at how agriculture and urban interact.

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