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/pageconjjohnson@unl.edu PanhandleAgEcon

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