Nebraska Farm Real Estate Market Highlights

Transcription

1 University of Neraska - Lincoln DigitalCommons@University of Neraska - Lincoln Neraska Farm Real Estate Reports Agricultural Economics Department 6-20 Neraska Farm Real Estate Market Highlights -20 Bruce B. Johnson University of Neraska-Lincoln, johnson2@unl.edu Sara Van NewKirk University of Neraska-Lincoln Tyler Rosener University of Neraska-Lincoln Follow this and additional works at: Part of the Agricultural and Resource Economics Commons Johnson, Bruce B.; Van NewKirk, Sara; and Rosener, Tyler, "Neraska Farm Real Estate Market Highlights -20" (20). Neraska Farm Real Estate Reports This Article is rought to you for free and open access y the Agricultural Economics Department at DigitalCommons@University of Neraska - Lincoln. It has een accepted for inclusion in Neraska Farm Real Estate Reports y an authorized administrator of DigitalCommons@University of Neraska - Lincoln.

2 Department of Agricultural Economics June 20 Report No.189 Neraska Farm Real Estate Market Highlights -20 By Bruce Johnson Sara Van NewKirk and Tyler Rosener The University of Neraska Lincoln does not discriminate ased on gender, age, disaility, race, color, religion, marital status, veteran s status, national or ethnic origin, or sexual orientation.

3 Neraska Farm Real Estate Market Highlights -20 By Bruce Johnson* Sara Van NewKirk** and Tyler Rosener** * Professor, Department of Agricultural Economics, University of Neraska Lincoln Phone No ; johnson2@unl.edu ** Undergraduate Research Assistants, Department of Agricultural Economics, University of Neraska Lincoln * * * * * * * * * * * * * * * Sincere appreciation goes to the survey reporters for their participation in the annual UNL Neraska Farm Real Estate Market Survey. Without their valuale input, much of the information within this report would not exist. Special appreciation also goes to Diane Wasser, Project Coordinator, for her signigicant contriutions throughout the survey process, report analysis, and preparation. NOTE: This report is availale as a downloadale PDF file at the following wesite: If electronic copies are not accessile, hard copies of these highlights can e requested for $7.00 per copy from: Department of Agricultural Economics University of Neraska Lincoln Attn: Diane Wasser 314 Filley Hall Lincoln, NE ii

4 Tale of Contents Introduction Neraska Land Values... 2 Tale 1: Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, Fe. 1, -Fe. 1, Tale 2: 20 Values and Recent Trends y Area of the State... 4 Tale 3: 20 Values and Recent Trends y Land Class in Neraska... 4 Land Value Ranges... 5 Tale 4: Average Reported Value Per Acre of Neraska Farmland for Different Types and Grade of Land in Neraska y Agricultural Statistics District, Feruary 1, Tale 5: Estimated Annual Net Rates of Return y Type of Land and Agricultural Statistics District, Factors Impacting Current Agricultural Land Markets... 7 Land Market Transaction Characteristics in... 8 Tale 6: Percentage Distriution of Agricultural Real Estate Transactions in y Buyer Type, y Agricultural Statistics District in Neraska Tale 7: Percent Distriution of Agricultural Real Estate Transactions in y Seller Type, y Agricultural Statistics District in Neraska... 9 Tale 8: Types of Financing Associated with Agricultural Real Estate Sales, y Agricultural Statistics District in Neraska... 9 Cash Rental Rates for Tale 9: Reported Cash Rental Rates for Various Types of Neraska Farmland:. 20 Averages, Percent Change in Averages form and Ranges y Agricultural Statistics District Tale 10: Reported Cash Rental Rates for Pasture on a Monthly Rate Basis for 20: Averages and Ranges y Agricultural Statistics District... Statistical Appendix Appendix Tale 1. Farm Real Estate Values in Neraska, USDA Historical Series Appendix Tale 2. Deflated USDA Farmland Values and Percent Changes for Neraska, Appendix Tale 3. Nominal and Deflated Agricultural Land Values y Selected Types of Land in Neraska, Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, Appendix Tale 5. Historical Per Acre Value Range for Different Types and Quality Grades of Land in Neraska y Agricultural Statistics District Appendix Tale 6. Historical Average Cash Rental Rates of Neraska Farmland For Different Types of Land y Agricultural Statics District, iii

5 List of Figures Figure 1. Neraska Agricultural Statistics Districts... 1 Figure 2. Average Value of Neraska Farmland, Feruary 1, 20 and Percent Change from a Year Ago... 2 Figure 3. Reporters Ratings of Factors Currently Influencing Agricultural Land Values in Their Areas of Neraska iv

6 Introduction The Department of Agricultural Economics, UNL has conducted a state-wide study of agricultural land markets each year for the past 33 years. The state is richly endowed with productive agricultural land, which results in Neraska ranking among the top five states in agricultural production. A primary aspect of the UNL land market series is an annual land market panel survey conducted Feruary 1 of each year. In the 20 survey, some 130 panel reporters from across the state provided their professional insight into the dynamics of the agricultural land markets in their areas of the state. These individuals are closely associated with the land markets through their professions as agricultural real estate appraisers, professional farm managers, agricultural lenders, etc. Moreover, continuity of the survey is maintained over the years as the vast majority of reporters have responded annually for a numer of years. The reporters provide point-in-time estimates of current agricultural land values and cash rents as well as more detailed information of actual agricultural real estate sales that have occurred over the previous year. Comparing these current measures against previous years results provide valuale trend indicators of this dynamic market. The historical UNL data series for agricultural values going ack to 1978 and agricultural cash rents ack to 1981 are included in the appendix. In most instances, the information series provides su-state perspectives. This is considered critical given the great variaility of land, water, and climate across the state. Consequently, regional information is presented y Neraska Agricultural Statistics District as noted in Figure 1 elow. The reader is cautioned, however, to use this information primarily for trend analysis and not to assume that the information provided is accurately depicting values and cash rents of a local agricultural land market, let alone a particular parcel of land. If more specific information is deemed necessary, we highly recommend seeking services of a certified agricultural real estate appraiser. Figure 1: Neraska Agricultural Statistics Districts 1

7 20 Neraska Land Values Recent conditions of high crop commodity prices and record-level farm incomes propelled the state s agricultural land values upward an average of 22% for the year ending Feruary 1, 20 (Figure 2 and Tale 1). The 20 current all-land average of $1,833 per acre is doule the all-land average from just six years previously in. Besides eing an all-time high in nominal dollars, the current all-land average value represents a new high in real (inflation-adjusted) dollars as well exceeding the previous high set in While all land classes of farmland posted large percentage gains over the year, the cropland classes showed the strongest gains. Su-state regional differences in value advances over the past year are noteworthy. The Northeast, Central, and South Districts all saw overall gains of aout 25%. For the first time in the UNL land value series, a land class in a su-state district exceeded an average value of $6,000 per acre (center pivot cropland in the East District). Figure 2: Average Value of Neraska Farmland, Feruary 1, 20 and Percent Change from a Year Ago 2

8 Tale 1: Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, Fe. 1, -Fe. 1, 20. a Type of Land and Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State c Dollars Per Acre Dryland Cropland (No Irrigation Potential) Rptd. in 20 Rptd. in % Change Dryland Cropland (Irrigation Potential) Rptd. in 20 Rptd. in % Change Grazing Land (Tillale) Rptd. in 20 Rptd. in % Change Grazing Land (Nontillale) Rptd. in 20 Rptd. in % Change Hayland Rptd. in 20 Rptd. in % Change Gravity Irrigated Cropland Rptd. in 20 Rptd. in % Change Center Pivot Irrigated Cropland Rptd. in 20 Rptd. in % Change All Land Average c Rptd. in 20 Rptd. in % Change a SOURCE: and 20 UNL Neraska Farm Real Estate Market Developments surveys. Value of pivot not included in per acre value c Weighted averages. Three- and five-year trends in values show wide variation across su-state regions as well as y land classes (Tale 2 and Tale 3). The five-year all-land average percentage change ranged from 52% in the Northwest District to 103% in the Northeast and South Districts. By land classes, oth the three-year and five-year percentage changes were highest for the cropland classes while the non-tillale grassland and hayland classes experienced much more moderate gains. For the five-year period to 20, the value increases for the Neraska cropland classes have averaged aout 12% per year, while the non-tillale grassland class averaged aout a 7% annual increase. 3

9 In contrast to the downward real estate value trends across the country for residential and commercial properties during the recent economic recession and anemic recovery, these rates of gain for Neraska agricultural land values are phenomenal. Tale 2: 20 Values and Recent Trends y Area of the State a Agricultural Statistics District 20 All-Land Average Value 1 year Change 3 year Change 5 year Change Dollars/Acre Percent Change Northwest North Northeast Central East Southwest South Southeast Entire State a Source: Annual UNL Neraska Farm Real Estate Market Surveys. Tale 3: 20 Values and Recent Trends y Land Class in Neraska a Land Class 20 Average Value 1 year Change 3 year Change 5 year Change Dollars/Acre Percent Change in Value Dryland Cropland No Irrigation Potential Irrigation Potential Grassland Tillale Non tillale Hayland Irrigated Cropland Gravity Center Pivot All Land a Source: Annual UNL Neraska Farm Real Estate Market Surveys. Value of pivot not included in per acre value. 4

10 Land Value Ranges As an income-producing asset, agricultural land derives its asic value from its real and/perceived income earnings. Consequently, market participants seem acutely aware of land productivity and therefore id accordingly. Reported 20 ranges in average value etween low-grade and high-grade land show rather extreme differences (Tale 4). Reporters determine their own criteria for making these estimates; ut generally would tend to follow the more conventional land class grades as Class I land eing high grade while low grade cropland would e more of Classes III and IV. In a strong upward moving land market with limited offerings availale, there is some tendency for potential uyers to e less selective. In turn, the range of values tends to narrow a it. Nonetheless, there still remains in place a significant value differential. Tale 4: Average Reported Value Per Acre of Neraska Farmland for Different Types and Grade of Land in Neraska y Agricultural Statistics District, Feruary 1, 20. a Type of Land and Grade Dryland Cropland (No Irrigation Potential) Average High Grade Low Grade Dryland Cropland (Irrigation Potential) Average High Grade Low Grade Grazing Land (Tillale) Average High Grade Low Grade Grazing Land (Nontillale) Average High Grade Low Grade Hayland Average High Grade Low Grade Gravity Irrigated Cropland Average High Grade Low Grade Center Pivot Irrigated Cropland Average High Grade Low Grade Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast Dollars Per Acre a SOURCE: 20 UNL Neraska Farm Real Estate Market Developments Survey. Value of pivot not included in per acre value

11 Tale 5: Estimated Annual Net Rates of Return y Type of Land and Agricultural Statistics District, Selected Years -20. a Type of Land and Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast Percent State Ave. Irrigated Land: Dryland Cropland: Grazing Land: a Source: Annual UNL Neraska Farm Real Estate Market Developments Survey Series

12 Reporters estimates of current annual net percentage rates of return given current values. Real estate appraisers refer to this percentage as the market-derived capitalization rate. Factors Impacting Current Agricultural Land Markets As expected, survey reporters ranked current crop commodity prices as the strongest element ehind recent land value advances. Also seen as particularly strong factors were demand from active farmers for farm expansion coupled with a limited amount of land offerings for sale. In contrast to a decade ago, the current perceived impact of federal farm program payments is considered to have negligile effect on area land value. Figure 3: Reporters' Rating of Factors Influencing Agricultural Land Values in Their Areas of Neraska, Feruary, 20 7

13 Land Market Transactions Characteristics in Based on 503 agricultural transactions in considered representative of the Market y UNL Survey reporters, a wealth of market characteristics can e derived. With the exception of the Northwest District, active farmers dominate the uyer side of the market (Tale 6). In the Southeast District 85% of the purchases were y active farmers For the state as a whole more than seven of every ten purchases in were made y active farmers/ranchers. Tale 6: Percentage Distriution of Agricultural Real Estate Transactions in y Buyer Type, y Agricultural Statistics District in Neraska. Type of Buyer Agricultural Statistics District Active Farmer Local Non-farmer Non-local Neraska Resident Out-of-State Buyer Percent Northwest North Northeast Central East Southwest South Southeast State SOURCE: Based on 503 transactions which occurred across Neraska during and reported in the 20 UNL Neraska Farm Real Estate Market Developments Survey. On the seller side of the agricultural land market, estate settlements represented the primary class in, although considerale variation is evident from region to region. For the state as a whole, active farmers represented less than one of five sellers in. 8

14 Tale 7: Percent Distriution of Agricultural Real Estate Transactions in y Seller Type, y Agricultural Statistics District in Neraska. Agricultural Statistics District Active Farmer Quitting Farmer Estate Type of Seller Local Non-farmer Non-Local NE Resident Out of State Resident Percent Northwest North Northeast Central East Southwest South Southeast State SOURCE: Based on 503 transactions which occurred across Neraska during and reported in the 20 UNL Neraska Farm Real Estate Market Developments Survey. Financial roustness of the uyer side of the market is evident y the fact that half the agricultural real estate transactions statewide were cash purchases involving no det financing (Tale 8). When det was incurred, financial institutions have required sustantial down payments (35%, or more); which, in turn, further reduces det exposure of recent mortgage-financed acquisitions. The highest incidence of mortgage-financed transactions in occurred in East and Southeast districts, a pattern that is consistent from previous years. Tale 8: Types of Financing Associated with Agricultural Real Estate Sales, y Agricultural Statistics District in Neraska. Agricultural Statistics District Cash Purchase Financing of Purchase Contract for Mortgage Deed Other Percent Northwest North Northeast Central East Southwest South Southeast State SOURCE: Based on 503 transactions which occurred across Neraska during and reported in the 20 UNL Neraska Farm Real Estate Market Developments Survey. 9

15 Cash Rental Rates for 20 A strong crop income outlook led to sustantial increases in cropland cash rents for 20. Percentage gains in cash rents for cropland ranged from 15% to 25% over levels (Tale 9). The rather extreme ranges in per-acre rental rates for any of the land classes and su-state area reflect not only land productivity variations ut also the fact that cash rental rates reflect a wide continuum of situations ranging from long-term cash rent arrangements that have not een adjusted for some time, to those that have een currently negotiated under spirited competitive conditions. For those interested in more detail aout the economics of leasing from oth tenant and landowner perspectives, we recommend accessing the Farm Lease Calculator (an Excel spreadsheet diagnostics tool) availale on our wesite: For pasture rental rates, oth on a per-acre and a dollar per month asis, the 20 rates are generally stale to slightly upward from previous year levels across most of the state (Tale 10). Tale 9: Reported Cash Rental Rates for Various Types of Neraska Farmland: 20 Averages, Percent Change in Averages from and Ranges y Agricultural Statistics District. a Type of Land Agricultural Statics District & Year NW N NE Central E SW S SE Dryland Cropland Average % Change High Third Quality Low Third Quality Gravity Irrigated Cropland Average % Change High Third Quality Low Third Quality Center Pivot Irrigated Cropland c Average % Change High Third Quality Low Third Quality Pasture: Average % Change High Third Quality Low Third Quality a Source: Reporters estimated cash rental rates (oth averages and ranges) from the 20 UNL Neraska Farm Real Estate Market Developments Survey. Insufficient numer of reports. 10

16 c Cash rents on center pivot land assumes landowner owns total irrigation system. Tale 10: Reported Cash Rental Rates for Pasture on a Monthly Rate Basis for 20: Averages and Ranges y Agricultural Statistics District. a Type of Land Agricultural Statics District & Year NW N NE Central E SW S SE Cow-Calf Pair Rates c Average High Third Quality Low Third Quality Stocker ( l) Rates Average High Third Quality Low Third Quality a Source: Reporters estimated cash rental rates (oth averages and ranges) from the 20 UNL Neraska Farm Real Estate Market Developments Survey. Insufficient numer of reports. c A cow-calf pair is typically considered to e 1.25 to 1.30 animal units. However, this can vary depending on weight of cow and age of calf.

17 Statistical Appendix 12

18 Appendix Tale 1. Farm Real Estate Values in Neraska, USDA Historical Series, a Year Numer of Farms Land in Farms Value of Land & Buildings Per Acre Per Farm Total Value Building Value Thousand Million Acres Dollars Thousand Dollars Million Dollars Million Dollars , ,864 1,919 1,974 2,027 2, ,084 2,240 2,591 2,978 3, ,439 2,974 2,860 2,635 2, ,552 2,505 2,508 2,526 2, ,3 2,015 1,609 1,625 1, ,587 1,516 1,4 1,310 1, ,061 1,157 1,283 1,580 1, ,992 2,257 2,649 2,927 2, ,192 3,477 3,610 3,6 3, ,523 3,501 3,839 4,131 4,

19 Appendix Tale 1. Farm Real Estate Values in Neraska, USDA Historical Series, a Year Numer of Farms Land in Farms Value of Land & Buildings Per Acre Per Farm Total Value Building Value Thousand Million Acres Dollars Thousand Dollars Million Dollars Million Dollars ,341 4,598 4,647 5,055 5, ,072 1, ,805 6,348 6,882 7,2 7,407 1,283 1,143 1,136 1, ,552 8,177 9,283,640 13, ,012 1,152 1, ,366 20,070 19,702 25,043 30,289 1,546 1,806 1,8 2,204 2, ,773 34,675 33,227 30,444 22,9 2,851 2,809 2,758 2,710 2, ,629 18,885,525 24,068 24,680 2,5 2,682 3,186 3,451 3, ,350 24,350 24,209 26,485 27,260 2,978 3,026 3,061 3,072 3, ,768 29,928 31,088,944 3,139 3,049 3,068 3,078 3, ,104 35,264 35,572 37,785 42,587 3,1 3,1 3,024 3,079 3,244 a ,030 1, ,071 3, ,140 1, ,090 3, ,330 1, ,640 4, ,340 1, ,104 4, ,460 1, ,576 4, ,780 1, ,168 5,762 SOURCE: Farm Real Estate Historical Series Data: , USDA, Economic Research Service, Sta. Bul. No. 855, May 1993 and earlier reports as well as recent electronic issues annually y Economic Research Service, U.S. Department of Agriculture. Preliminary estimates. 14

20 15 Appendix Tale 2. Deflated USDA Farmland Values and Percent Changes for Neraska, 1930 to 20. a Year USDA Average Value/Ac. For Neraska 1st Quarter GDP Price Deflator ( = 100) Deflated Average Value/Ac. Year-to-Year Change Deflated Farmland in Values c

21 Appendix Tale 2. Deflated USDA Farmland Values and Percent Changes for Neraska, 1930 to 20. a Year USDA Average Value/Ac. For Neraska st Quarter GDP Price Deflator ( = 100) Deflated Average Value/Ac Year-to-Year Change Deflated Farmland in Values c a Revised from series reported in earlier reports. Refers to year ending March 1 for years prior to 1976; year ending Feruary 1 for years ; year ending April 1 for years ; year ending Feruary 1, ; year ending January 1, -1994; mid-year -1997, and year ending January 1,. Computed y dividing the USDA average value per acre y the 1st Quarter GDP Price Deflator ( = 100) and multiplying y 100. c A positive value entry in this column represents a real increase in asset value for the year (i.e., the rate of land value appreciation exceeded the general rate of inflation for the U.S. economy). Conversely, a negative value entry represents a real decrease in asset value. d Preliminary estimate

22 Appendix Tale 3. Nominal and Deflated Agricultural Land Values y Selected Types of Land in Neraska, 1978 to. a Year Dryland Cropland Nominal Value/Ac. a Center Pivot Irrigated Cropland c Grazing Land (Nontillale) All Land Average 1st Quarter GDP Price Deflator ( = 100) Dryland Cropland Deflated Value/Ac. Center Pivot Irrigated Cropland c Grazing Land (Nontillale) All Land Average d Dollars/Ac Dollars/Ac a Feruary 1 estimates reported in the UNL Neraska Farm Real Estate Market Developments surveys: revised series, 6/09. Computed y dividing the average value per acre y the 1st Quarter Gross Domestic Price (GDP) Deflator and multiplying y 100. c Pivot not included in per acre value. d Deflated all land average ased on the UNL Neraska survey series and will not correspond directly with the USDA series presented in Appendix Tale 2. 17

23 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre Dryland Cropland (No Irrigation Potential)

24 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre Dryland Cropland Irrigation Potential)

25 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre Grazing Land (Tillale)

26 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre Grazing Land (Nontillale)

27 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre Hayland

28 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre Gravity Irrigated Cropland

29 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre Center Pivot Irrigated Cropland

30 Appendix Tale 4. Average Reported Value of Neraska Farmland for Different Types of Land y Agricultural Statistics District, a Year Agricultural Statistics District Northwest North Northeast Central East Southwest South Southeast State cd Dollars Per Acre All Land Average c d a c d Feruary 1st estimates reported in the annual UNL Neraska Farm Real Estate Market Developments Surveys. Pivot not included in per acre value. Weighted average ased upon acreage in each land type. All land average for state may not conform to USDA series due to different acreage weighting. In addition, the USDA series includes farm uildings in its per acre estimates of value. 25

31 Appendix Tale 5. Historical Per Acre Value Range for Different Types and Quality Grades of Land in Neraska y Agricultural Statistics District, -20. a Reported Value Per Acre District and Type of Land Low Grade High Grade Dollars per Acre Northwest: Dry Crop (No irr. potential) 1 Dry Crop (Irr. pot.) Grazing (Tillale) Grazing (Nontillale) Hayland Gravity Irrigated Center Pivot Irrigated North: Dry Crop (No irr. potential) Dry Crop (Irr. pot.) Grazing (Tillale) Grazing (Nontillale) Hayland Gravity Irrigated Center Pivot Irrigated Northeast: Dry Crop (No irr. potential) Dry Crop (Irr. pot.) Grazing (Tillale) Grazing (Nontillale) Hayland Gravity Irrigated Center Pivot Irrigated Central: Dry Crop (No irr. potential) Dry Crop (Irr. pot.) Grazing (Tillale) Grazing (Nontillale) Hayland Gravity Irrigated Center Pivot Irrigated East: Dry Crop (No irr. potential) Dry Crop (Irr. pot.) Grazing (Tillale) Grazing (Nontillale) Hayland Gravity Irrigated Center Pivot Irrigated Southwest: Dry Crop (No irr. potential) Dry Crop (Irr. pot.) Grazing (Tillale) Grazing (Nontillale) Hayland Gravity Irrigated Center Pivot Irrigated See footnotes at end of tale. 26