Nebraska Farm Land Prices: When’s the right time to buy or sell?

Land PricesIt’s a popular topic at every rural coffee shop: Will land values remain this remarkably high? It’s a good question.  With values that have been rising steadily over the last 20 years, and that have seen even larger gains in the last two to five years, farmers and landowners wonder if conditions will remain in place that will maintain these rates for the foreseeable future.

Rising land values have especially impacted farmers and landowners in Nebraska.  According the USDA, Nebraska’s all-land average value has doubled in the last five years, and in some areas has increased more than 125%. Additionally, the USDA’s land value survey reported a 33% increase for Nebraska farmland—the highest percentage gain of any state in the nation.

Conversations that involve record value gains in any market will include references to booms, bubbles, and bursts, and farmers and landowners in Nebraska are particularly aware of this. Many current producers experienced—or saw their parents experience—the farmland bubble burst in the 1980s, and are keenly sensitive to this issue today. Is the current farmland value bubble about to burst?

The answer to this question requires a basic understanding of what factors affect the rise and fall of prices. What has contributed to these record gains in Nebraska farmland values?

One is the current US monetary policy, with record low interest rates and a weak dollar. The weak dollar encourages agriculture exports, while the low interest rates discourage landowners from selling their land, thus creating a scarcity-driven land market and rising land values. Some agricultural economists predict that land values are set to go down, just because interest rates cannot go any lower than they are currently.

Another factor that affects land values is the US and global economies. Poor economic gains in both the US and global economies will eventually affect the disposable incomes of American households, and will in turn affect food prices.

Finally, and perhaps most obviously, commodity prices affect land values. Last year’s record drought forced commodity prices up, which in turn brought even greater land values to Nebraska and area states. Favorable weather conditions for the 2013 growing season will bring commodity prices down, which in turn might end up bringing farmland values to lower levels.

The outlook for Nebraska land values is up to debate. Some economists think that while there will be some more significant corrections in the land market—especially in states like Nebraska that have seen the most dramatic value increases—the chance of another burst is far less likely, simply due to the fact that today’s farmers are not as seriously leveraged as they were in the 1980s.

One thing is certain: Farmland prices are sure to remain a top concern for Nebraska farmers and landowners as we head into the 2013 harvest season. Please don’t hesitate to give us a call at United Farm and Ranch Management for any questions or concerns you may have when it comes to your land values and rental income.

 

Effects of the US Farm Bill on Landowners and Farmers

Time is running out for Congress to vote on a newly proposed version of the farm bill, leaving some farmers and landowners in limbo when it comes to making decisions regarding varying aspects of their farming enterprises. The farm bill is renewed every 5 years, and has already seen a 1 year extension after it had been set to expire in 2012. The new extension expired September 30, 2013.

Earlier this summer, the House and Senate hammered out new versions of the Farm Bill. The Senate passed their version in June, and on July 11th, the House passed a so-called “Farm Only” version of the bill, seeking to separate out the supplemental food program (SNAP) from the bill and place it in separate legislation.

The Senate version of the farm bill is similar to the last extended 2008 legislation and includes the food program. It also retains the permanent farm laws of 1938 and 1949. The proposed House bill signals a shift in farm law policy by eliminating the supplemental food program from the farm bill, as well as eliminating the farm laws of 1938 and 1949. Eliminating these permanent farm laws would discontinue direct payments and make other adjustments, thereby saving money on commodity programs in the long run. The permanent farm laws in the proposed House legislation would be replaced with a new Title I, which would ensure that farm commodity programs would continue in the event that a new farm bill is not enacted or renewed.

At any rate, how would the proposed farm bill affect farmers and landowners? At the very least, they will face a bit of uncertainty until a farm bill is passed or renewed. The most immediate effects would be a possible end to direct payments and other various subsidies should some form of the House bill pass Congress.  Many area farmers wonder how proposed changes might affect the crop insurance industry, and how these changes may affect their risk management decisions.

On September 19th, the House succeeded in passing another bill that attempts to address the SNAP benefits portions that has traditionally been included in the farm bill. As separate legislation, it contains $40 billion worth of cuts, out of $80 billion. These cuts would be spread out over a period of 10 years.

Now, the House and Senate need to go to Conference Committee and attempt to meld together the Senate’s version and the two separate House versions and then agree on passage of a new bill.  Will they have the votes, and if so, will President Obama sign it into law, should portions of the House version pass committee containing cuts to the food stamp program?  Time will tell, but these proposals will make for interesting political dynamics in an age of huge deficits and amid calls for fiscal responsibility.

To learn more about how the next farm bill may affect your land and tenants and to learn ways to minimize risk, set up a free consultation with one of our experienced farm mangers.

More Options for Sellers and Buyers

United Country Real EstateUFARM joins United Country Real Estate Network

 

UFARM recently announced their affiliation with United Country Real Estate. United Country Real Estate has the largest network of conventional and auction real estate professionals in the U.S., Mexico and Latin America.  They have been an innovator in real estate marketing since 1925 and support 550 offices. United Country marketing websites involve more than 3,500 separate sites and traffic of approximately 3 million visitors per month.

UFARM’s goal is to enhance real estate services by providing additional options for selling and buying a farm, ranch or a variety of property types.  UFARM now has access to exclusive national real estate catalogs, national advertising of local properties in hundreds of newspapers and magazines, and a private database of more than 400,000 buyers.