The latest on land valuation

As it is cold and snowy outside, it seems as good of time as any to look at new research on land valuations in Nebraska, South Dakota, and elsewhere.

First up is a new report from Farm Credit Services of America.  Farm Credit’s report of shows a potential leveling off of the market for farmland based upon two reports.  The first report, the Benchmark Land Values survey tracks the value of 65 farms for more than three decades.  The Benchmark shows, based upon the previous six months, the average change in valuation for Nebraska farms at 0.7% and South Dakota farms at 7.2%.  Of potential note, Iowa’s previous six month valuation shows a decrease of 2.8%.

The second report used by Farm Credit is an analysis of more than 3,500 agricultural real estate transactions in Iowa, Nebraska, South Dakota, and Wyoming.  While demand remains strong, the number of land auctions decreased from 2012 to 2013.  Some highlights from the report:

  • South Dakota unimproved cropland values have steadily increased for the last three years and are currently selling at all-time highs with premium ground bringing up to $12,000 per acre.
  • Nebraska dry cropland prices have had significant price swings over the last two years. For the fourth quarter of 2013, prices increased by 15 percent to $5,900 per acre. The price per acre for 2012 and 2013 was $5,500 on average.
  • Nebraska irrigated cropland prices continued to rise, selling at all-time highs of $8,100 per acre. Land prices increased 6 percent during the fourth quarter of 2013. For all of 2013, prices were up 4.4 percent compared to 2012.

Also released recently in the Kansas City Federal Reserve’s Agricultural Credit Survey.  The survey indicates year-to-year gains, ending in September 2013, for irrigated, non-irrigated, and ranch land.  Year-to-year valuations for Nebraska remained strong, with Nebraska showing gains of 13.1% for non-irrigated land, 20.4% for irrigated land, and 19.5% for ranch land.  Of note, the surveyed bankers anticipate a plateau of valuation at the end of 2013 and into 2014.  In other words, valuations will remain steady.

Whether the above is good, bad, or indifferent news depends upon the point of view of each farmer or rancher.  And the above certainly doesn’t capture the fluctuations in the commodities markets either.  But land valuation is something to keep an eye on heading into the 2014 season, if only to have an accurate idea for your net worth statements and, if applicable to your operation, cash rental rates.

As for beginning farmers, while valuations remain high and demand strong, a leveling of valuations may be some slightly good news.  If valuations remains stable, it is possible to plan for purchasing property without having to account for double-digit increases year-to-year.  So beginning farmers, even if you do not currently own property, keep an eye on the valuations and plan accordingly.

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