The average market value of farmland in Nebraska declined by three percent over the prior year to $2,745 per acre according to the 2018 Nebraska Farm Real Estate Market Survey (Table 1). This marks the fourth consecutive year of downward pressure. Market values have dropped 17 percent since reaching a high of $3,315 in 2014.
The University of Nebraska-Lincoln Department of Agricultural Economics annually surveys Nebraska land professionals including appraisers, farm and ranch managers, and agricultural bankers. Results from the survey are divided by land class and summarized by the eight Agricultural Statistic Districts of Nebraska.
Tillable grazing land values declined by six percent, the largest percentage decline of the seven land classes. Sharp drops of 11 and 10 percent, respectively, in the Northeast and Central Districts contributed to the overall reduction in tillable grazing land values. Hayland in the Central and Southwest districts also experienced 10 percent declines in value. Survey participants pointed to low commodity prices over the prior year and current property tax policies as the reason for declining Nebraska farm real estate values.
Values for dryland and irrigated cropland across Nebraska declined one to seven percent. Several districts exist where regional land values increased two to six percent, but these instances were small indicating a fairly unchanged land market for the region.
Future prospects for cropland in Nebraska remain interlaced with the earning potential for the major commodities grown across the state, input expenses, and monetary policies influencing the cost of borrowing for future land purchases. Regulation policies guiding the use of water for irrigation were also noted as a potential driver for the changes in the future value of irrigated cropland in certain areas of the state according to survey participants.
Land classes serving the cow-calf industry, including grazing land and hayland, experienced a wide range in declines between one and 10 percent across the state. In several districts, tillable grazing land and hayland reported small gains of two to six percent for tillable grazing land or hayland.
According to survey participants, demand for beef and availability of forages during periods of drought were two of the major drivers for the future value of land classes serving the cow-calf industry. Recent increases in exports of beef from Nebraska to China remain critical for the value of cattle raised in the state. Also, extended periods of drought might increase the price and availability of forages influencing the potential market value of hayland.
On average, rental rates for dryland and irrigated cropland along with grazing land for pasture or cow-calf pairs trended down about two to seven percent across Nebraska for 2018 (Table 2).
Irrigated cropland rental rates on average declined between two and five percent across Nebraska with a small increase noted in the North District. For dryland cropland, the Central, Southwest, South, and Southeast Districts experienced small rates of increase.
Survey participants indicated that property taxes are one of the landowners’ most critical concerns during rental negotiations. Landlords face the prospects of low returns on their land after accounting for property taxes. Tenants face tight cash flows with current commodity prices, input expenses, and rental payments. Negotiating an equitable rental rate remains a challenge for landlords and tenants.
Division of annual maintenance and upkeep expenses associated with irrigation equipment remains a major consideration during rental negotiations between landlords and tenants. Tenants willing to provide maintenance services on irrigation equipment need to bring these expenses up in negotiations to equitably account for their contribution to the leases.
Pasture and cow-calf pair rental rates were mixed depending upon the district of the state. Most districts experienced declines of two to seven percent, while others saw grazing rates increases of two to three percent.
Several other considerations, besides the productivity of the grazing land, factor into the rental rates paid across Nebraska according to survey participants. These include annual maintenance of fence, weed control, removal of unwanted brush or cedar trees, and watering systems for livestock when applicable. Depending on the landlord or tenant, either the landlord or tenant may be willing to provide these services.
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 2018 and will be available online via the Nebraska Farm Real Estate website.