Nebraska Farm and Ranch Land Values Jessica Johnson Asst. Extension Educator, Agricultural Economics Panhandle Research and Extension Center
Jun 29, 2015
Nebraska Farm and Ranch Land Values
Jessica Johnson Asst. Extension Educator, Agricultural Economics
Panhandle Research and Extension Center
Discussion• Land Value Trends• Land as an Investment• Cash Rental Rates• Lease Agreements
Land Value Trends
Real Land Value Increase
Perfect storm for land value increase
• Availability of Money – profits from farming• Low interest rates• Lack of land for sale• Limited return from any other investment• Farmers willing to expand their operations
Future?! – Bubble might deflate (not burst?)
Average Value of Nebraska Farmland, % Change from 2013
Northwest $855/ac
20%
North $1,220/ac
20%
Northeast $6,460/ac
4%
Southwest$1,985/ac
12%
Central$4,195/ac
18%
Southeast $6,185/ac8%
East $7,285/ac
0.3%State
Average $3,315/ac
9% Source: Annual UNL Nebraska Farm Real Estate Market Surveys
South $4,815/ac9%
Annual ComparisonAgricultural Statistics District
2014 All-Land Average ValueDollars/Acre
2011-2012% change
2012-2013% change
2013-2014% change
Northwest 855 23 13 20
North 1,220 21 20 20
Northeast 6,460 35 24 4
Central 4,195 34 27 18
East 7,285 31 18 0.3
Southwest 1,985 34 31 12
South 4,815 32 33 9
Southeast 6,185 22 26 8
Entire State
3,315 31 25 9
2013/2014 Area Land ValuesLand type Northwest North Southwest
Dryland – no potential 845 21 1720 49 1965 28
Dryland – irr. potential 935 28 2390 24 2035 23
Grazing – tillable 550 29 1150 10 890 34
Grazing nontillable 405 9 625 25 805 41
Hayland 1025 31 1660 44 1545 33
Gravity Irrigated land 3040 6 4215 36 4515 17
Center pivot Irrigation land 3770 21 4985 -5 5750 11
Source: UNL Nebraska Farm Real Estate Market Highlights 2013-2014 Pg. 6
Land as an Investment
2014 Annual Net Rates of Return to Land
1990 1995 2000 2005 20100.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.08.3
4.64.0
2.1
6.2
3.5
Dryland Cropland Grazing Land Irrigated Land
Nebraska Farm Real Estate Highlights Pg. 7-9
2014 Land Sales Statewide Northwest North
Cash Sales 45% 75% 50%
Mortgage 53% 23% 50%
Purchase by an Active Farmer/Rancher
81% 54%* 83%
Out of State Buyer 5% 32%‡ 0%
Sold By Estates 41% 18% 29%* Lowest Percentage ‡ Highest Percentage Nebraska Farm Real Estate Highlights Pg. 11-12
Cash Rental Rates
UNL vs. USDA
Reported Cash Rental Rates: Dryland Cropland
2014 Average % Change
High Low
Northwest 40 0 55 30
North 70 23 95 45
Northeast 245 5 305 185
Central 110 -7 170 70
East 215 -2 270 160
Southwest 50 -15 65 40
South 90 -28 125 70
Southeast 175 1 225 130Source: Nebraska Farm Real Estate Market Highlights 2013-2014 Pg. 13
2013 Nebraska Dryland Cropland Rates Paid Per Acre
Reported Cash Rental Rates: Gravity Irrigated Cropland
2014 Average % Change High Low
Northwest 145 b 190 90
North 205 b 260 170
Northeast 290 -9 340 215
Central 250 -4 325 190
East 315 -2 375 260
Southwest 190 -10 235 155
South 225 -18 280 180
Southeast 195 -1 355 235Source: Nebraska Farm Real Estate Market Highlights 2013-2014 Pg. 13
Reported Cash Rental Rates: Center Pivot Irrigated Cropland
2014 Average % Change High Low
Northwest 200 -11 240 150
North 250 -6 340 190
Northeast 370 -2 445 315
Central 260 -33 280 220
East 355 0 425 290
Southwest 305 13 345 255
South 270 -14 335 240
Southeast 335 -3 415 265Source: Nebraska Farm Real Estate Market Survey 2013-2014 Pg. 13
2013 Nebraska Irrigated Cropland Rates Paid Per Acre
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
Cash Rental Rates for the Northwest District
Dryland Gravity Irrigated Center Pivot Irrigated
Ren
t P
er
Acr
e
Reported Cash Rental Rates 2013: Pasture
Average % Change High Low
Northwest 10 -23 15 5
North 25 56 35 15
Northeast 70 32 100 55
Central 30 -14 45 25
East 55 12 70 45
Southwest 20 18 30 15
South 35 -5 50 30
Southeast 50 19 65 40Source: Nebraska Farm Real Estate Highlights 2013-2014 Pg. 13
2014 Pasture Rents – by cow/calf pair per monthNorthwest North Southwest
Average 32.30 48.55 45.45
High 43.55 69.45 59.45Low 29.15 39.65 39.90
Source: Nebraska Farm Real Estate Market Highlights Pg. 14
2013 Nebraska Pasture Rent Paid per Acre
Cash Rent Summary• Note Differences in numbers
• NASS survey• UNL Cash Rent survey• Coffee Shop
• Cash rents clearly up recently – but don’t always trend with land values (10% vs 20+%)
• Rents are still determined by supply and demand
• Tenants need to sharpen the pencil• Landlords need to be understanding
Rental Rate Secret
WHATEVER THE LANDLORD IS WILLING TO ACCEPT AND THE
TENANT IS WILLING TO PAY
Lease Agreements
Components of Good Leases • They are written – not verbal or handshake
– Terminating handshake or verbal leases• Needs to be done by 9/1 of any year for the next year• Termination notice is done by writing (Certified Mail)
• Good Communications• TRUST• Use of good practices• Put the land resource first• Sub-leasing allowed?
– Cropland, stalks, or hay– Hunting?
Quick calculation of farmland leases• Roughly 30% of the gross income should go to
landlord– Comes from 30-70 split of crop share lease
• 180 bu. Corn times $4.25 per bushel is $765 gross per acre
• $765 gross times 30% equals $230 per acre rent– Assumes the following
• Yield is APH• Price is Fall ‘14• % can vary by crop and location in Nebraska
Pasture Leases• Runs from May 1 to October 1 (5-month
period)• Includes the legal description of the land• Shows in and out dates• Describes penalties for early in or late out• Describes when payments are due and
how• How are typical leases
established/terminated?– Verbal– Written
Pasture Lease Considerations• Stocking rate by head, AUM, pairs,
frame, weight, color…– Pasture inspection: owner, 3rd party…
• Termination provisions• Contingency provisions
– Owner’s death– Tenant’s death– Sale– Disaster occurrences
• Drought or grass loss• Fire – or other
Determining Pasture Rents• From per acre to per pair/month
Assume going per acre rent in SB county is $10– Scotts Bluff County = 18 acres/pair for 5
months – 500 acres = 28 pairs – 500 * $10 = $5,000 rent/28 pairs =
$178.57 season or $35.71/pair/month
• 2. Return on Investment– % ROI X Land Value = Rent– 3% return X $475 value =$14.25
Resources• UNL Nebraska Farm Real Estate Surveyhttp://agecon.unl.edu/realestate.htmlUpdated in June
• http://AgLease101.org– Example Written Lease Agreements
• USDA NASS NE Office, Charts & Mapshttp://www.nass.usda.gov/Statistics_by_State/Nebraska/Charts_and_Maps /Updated every September
– Dryland Cash Rental Rates– Irrigated Cash Rental Rates – Pasture Cash Rental Rate
Office: 308-632-1247 go.unl.edu/[email protected] PanhandleAgEcon
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