As farmers and landowners gear up for the 2017 growing season, the land they are preparing continues its downward trend in value that has characterized the last three years. How much have Nebraska farmland values decreased since 2016? The University of Nebraska-Lincoln’s annual Nebraska Farm Real Estate Market Survey delved deeper into the land market trends in the Cornhusker state.
According to preliminary findings from the survey, the weighted average farmland value had declined by approximately 10 percent over the past year, to $2,805 per acre, marking the third consecutive year of of decline, and down a total of approximately 15 percent since its peak in 2014 at $3,315 per acre.
When taking into account land classifications, dryland cropland with irrigation potential took the biggest hit, with a 13 percent decline. This was followed closely by tillable grazing land, which declined 12 percent.
Sustained lower commodity prices seem to be the main reason for these declines, with producers less likely to develop these land classes due to less economic incentive. Survey participants also indicated lowered expectations that commodity prices will improve for the foreseeable future, also contributing to these value declines. Participants also cited regulatory policies in place that would further retard development of this particular land class.
Following dryland cropland with irrigation potential and tillable grazing land, dryland cropland without irrigation potential and nontillable grazing land had the third largest price decline since February 2016 at 10 percent, with the sharpest rates of decline occurring in the Central, Southwest, and Southern districts at a rate of 15 percent.
Lastly, gravity and center pivot irrigated cropland reported the lowest rate of decline, ranging between 6 and 4 percent. Northwest, Southwest, and Southeast parts of the state dropped more than other districts, at 13-16 percent vs. 5-7 percent. Participants to the survey were pessimistic about these rates improving in the near future, citing the availability of water and policies affecting its use as potential negative forces. However, participants also stated that technological advancements in irrigation management may alleviate some of these challenges.
Similarly, rental rates for agland in Nebraska also declined due to sustained lower commodity prices. As property tax levels continue to be a burden on landowners, negotiating equitable rental rates remain challenging.
Irrigated cropland rental rates declined between 5 and 10 percent, with center pivot irrigated cropland declining from 9-12 percent. Pasture and cow-calf rental rates also fell 5-15 percent across Nebraska, with the strongest rate of decline occurring in regions noting the highest grazing rates over the past several years.
Certainly, these trends aren’t welcome news to farmers and landowners. Hopefully, the Nebraska Legislature will continue to push for solutions to the ever-burgeoning property taxes that burden producers across the state, which would go a very long way in alleviating the issues facing Nebraska farmers.
If you have concerns about the financial health of your farming operation, please don’t hesitate to give us a call. We are happy to put together a plan with you to help you weather the storm.
Source consulted: “2017 Trends in Nebraska Farmland Markets: Declining Agricultural Land Values and Rental Rates.” Agricultural Economics. University of Nebraska-Lincoln. 15 Mar. 2017. Web. 28 Mar. 2017.