Nebraska Farmland Value Drops 10 Percent03/21/2017
Nebraska’s land auctions still attract a crowd — farmers in co-op hats, curious neighbors, keen-eyed investors.
“The crowds are about the same,” said Travis Augustin, an auctioneer and managing broker with Hastings-based Ruhter Auction & Realty.
But the bidders, he said, are raising their hands a little slower and less often than they did when farming was more profitable.
The University of Nebraska’s land-market survey, which appeared in the Wednesday edition of Cornhusker Economics, shows slower bids and land sales that have translated into a 10 percent decline in Nebraska’s average farmland value over the past year.
It marks the third consecutive year Nebraska’s weighted average price for farmland has declined. The average, as of Feb. 1, was $2,805 per acre this year, which is 15 percent lower than the state’s 2014 peak of $3,315 per acre.
The Nebraska appraisers, farm managers and agricultural finance professionals who replied to the survey said low commodity prices and concerns about high property taxes are putting pressure on land values, said Jim Jansen, an agricultural economist with UNL’s Extension Office.
But the state average doesn’t tell the whole story.
“Every piece of land is different. You have to look at the farm to actually see its true potential,” Augustin said.
Prices and declines vary depending on a range of factors, including region, land use, productivity and whether the land is irrigated.
Augustin said buyers are being more selective.
“Good irrigated farm ground, good soils and good water is still in high demand,” he said. “There are still a lot of buyers out there looking for farmland, and still a lot of people in a strong financial position able to buy it.”
Dryland with irrigation potential dropped an average of 13 percent, the biggest decrease of all the statewide land classes, followed by tillable grazing land at 12 percent.
When crop prices were better, there was incentive to develop those land classes to produce higher yields. But with low commodity prices, there is less of that incentive present to help buoy the value. Regulatory issues related to developing irrigation also were noted as a negative by survey respondents.
The next-hardest-hit class was dryland without irrigation potential and nontillable pastures, both of which saw declines of about 10 percent. The drop was steepest, about 15 percent, in heavy winter wheat-producing areas, such as the central, southwest and southern areas of Nebraska. Wheat had particularly low prices in 2016, which likely contributed to the decline.
The cost to rent land for farming and ranching also declined. The cost to rent irrigated cropland fell 5 to 10 percent across the state. Pasture land rates dropped 5 to 15 percent, depending on the region, with the biggest declines in eastern Nebraska, which had the highest rents.
Pat Chohon, part-owner and Realtor for O’Neill-based Waldo Realty, said the most-active buyers in the current land market are neighbors looking to expand their own farms.
But the investors are still there, standing at the back of the auction crowd getting a feel for the market.
“I think the general consensus is everyone realizes things do cycle and they’re just patiently waiting,” Chohon said.
Source: Nicholas Bergin, Lincoln Journal Star