2013 NEBRASKA AGLANDMARKET HIGHLIGHTSbyBruce JohnsonUNL Department ofAgricultural Economicsbjohnson2@unl.edu
The Market in a Nutshell“A $7 Corn Land MarketWith $5 Corn on the Horizon”
Recent History:Land Boom ConditionsNebraska at the “Epicenter”of the U.S. Land Boom
USDA Farmland Value Percentage Changes6/1/2011 – 6/1/201210.913.613.71717.519.220.922.823.926.5833.548 States10th Ohio9th ...
Land Class2013 AverageValue1-YearChange3-yearChangeDollars/Acre % Change in ValueDryland Cropland:No Irrigation Potential ...
Sharp Upward Advances Across the State2013 Nebraska Farmland Values and Recent Trendsby Sub-State RegionAgriculturalStatis...
Nebraska NominalAgricultural Land Values05001,0001,5002,0002,5003,0003,500Price($/acre)YearLonger-RunHistory: Upward but ...
2013 Nebraska Values Adjusted ForInflation At New Heights!05001,0001,5002,0002,500Price($/acre)YearUSDA Real Average Land ...
Key Land Boom Drivers#1 Record-Shattering Farm Income Levels012345678NetFarmIncome(Billion$)YearAnnual Net Farm Income In ...
$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.002000 2001 2002 2003 2004 2005 20...
Key Land Boom DriversHistorically Low Interest RatesFarm Income LevelsCapitalization Rates#2
3.8%3.2%1.9%4.7%4.1%2.9%5.7%5.4%3.4%Estimated Net Rate of Return onInvestment: Selected YearsPercent0 1 2 3 4 5 6Irrigated...
Value-to-Cash Rent Multiple For Eastern NebraskaCenter Pivot Cropland, 1981-2012PValue–to–Cash Rent RatioClimbing into New...
What’s On The Horizon?Prevailing DroughtCutting Production?Increasing Input Costs?$5/Bu. Corn?
Cash Rent Market Trends More Moderate
Question:Are Tenants Taking onToo-High of Rents?Answer:MAYBE!
Depends on 2013 CommodityPrices and YieldsIf Paid $350/AC For Irrigatedand $220/AC Dryland CroplandIf Paid $350/AC for Irr...
Summing Up:The Boom Years May Be OverReal Estate Meltdown Unlikely--But Some Readjustmenton the Horizon
THE OWNERSHIP AND SUCCESSION OFAGRICULTURAL LAND :Four Key Implications#1 Since agricultural production assets areextremel...
KEY IMPLICATIONS CONT: Establish Goals/Objectives and an Associated Plan(with all Stakeholders involved)Are we managing a...
KEY IMPLICATIONS CONT:#2 Given the Highly-Dynamic Nature ofAgricultural Asset Values: Consider Business Transition/Succes...
KEY IMPLICATIONS CONT.:#3 Since Farm Family Heirs Increasingly are choosing toretainownership of Agricultural Assets: Iss...
KEY IMPLICATIONS CONT.:#4 Given High Levels of Acquired Wealth: Greater Opportunity (and tax incentives) for philanthropi...
THE FARM TRANSITION:NOT dividing up the spoils of ahard-working generation.BUT rather, passing on theheart and soul to the...
Thank you
Revised 2013 Nebraska Ag Land Market Highlights
Revised 2013 Nebraska Ag Land Market Highlights
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Revised 2013 Nebraska Ag Land Market Highlights

  1. 1. 2013 NEBRASKA AGLANDMARKET HIGHLIGHTSbyBruce JohnsonUNL Department ofAgricultural Economicsbjohnson2@unl.edu
  2. 2. The Market in a Nutshell“A $7 Corn Land MarketWith $5 Corn on the Horizon”
  3. 3. Recent History:Land Boom ConditionsNebraska at the “Epicenter”of the U.S. Land Boom
  4. 4. USDA Farmland Value Percentage Changes6/1/2011 – 6/1/201210.913.613.71717.519.220.922.823.926.5833.548 States10th Ohio9th Missouri8th Indiana7th Illinois6th Kansas5th Minnesota4th Iowa3rd South Dakota2nd North Dakota1st Nebraska0 5 10 15 20 25 30 35 40Rank / StateSource: Economic Research Service, U.S. Department of AgricultureAgricultural Land Markets up Acrossthe Country, but Nebraska And NeighboringStates Leading the Nation
  5. 5. Land Class2013 AverageValue1-YearChange3-yearChangeDollars/Acre % Change in ValueDryland Cropland:No Irrigation Potential 3010 25 97Irrigation Potential 5,270 21 102Grassland:Tillable 1230 22 84Non-tillable 695 19 64Irrigated Cropland:Gravity 6835 27 109Center Pivotb 7590 30 115All Land: 3040 25 102a Source: Annual February 1st UNL Nebraska Farm Real Estate Market Surveys.b Value of pivot not included in per acre value.Nebraska Land Values Climb 25% in Past 12 Months2013 Values and Recent Trends by Land Class in NebraskaaThe Current Market
  6. 6. Sharp Upward Advances Across the State2013 Nebraska Farmland Values and Recent Trendsby Sub-State RegionAgriculturalStatisticsDistrict2013 All-LandAverage Value1-yearChange3-yearChangeDollars/Acre Percent ChangeNorthwest 715 13 54North 1055 20 69Northeast 6165 24 113Central 3750 27 103East 7185 18 93Southwest 1750 31 89South 4460 33 118Southeast 5400 26 121Entire State 3040 25 102Source: Annual UNL Nebraska Farm Real Estate Market Surveys.
  7. 7. Nebraska NominalAgricultural Land Values05001,0001,5002,0002,5003,0003,500Price($/acre)YearLonger-RunHistory: Upward but notsteady climb forseveral decades “Boom to Bust”event just 30years ago Major climb innominal valuesin recent years
  8. 8. 2013 Nebraska Values Adjusted ForInflation At New Heights!05001,0001,5002,0002,500Price($/acre)YearUSDA Real Average Land Values for NE: 1950-2013
  9. 9. Key Land Boom Drivers#1 Record-Shattering Farm Income Levels012345678NetFarmIncome(Billion$)YearAnnual Net Farm Income In Nebraska:2001- 2012Series1Source:ERS
  10. 10. $0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012P$billion$perbushelNebraska Corn Price & Net Farm IncomeNebraska Net Farm IncomeNebraska Average Corn Price
  11. 11. Key Land Boom DriversHistorically Low Interest RatesFarm Income LevelsCapitalization Rates#2
  12. 12. 3.8%3.2%1.9%4.7%4.1%2.9%5.7%5.4%3.4%Estimated Net Rate of Return onInvestment: Selected YearsPercent0 1 2 3 4 5 6Irrigated LandDryland CroplandGrazing LandIrrigated LandDryland CroplandGrazing LandIrrigated LandDryland CroplandGrazing Land2013:2007:2002:Source: UNL Nebraska Farm Real Estate Market Developments Survey Series
  13. 13. Value-to-Cash Rent Multiple For Eastern NebraskaCenter Pivot Cropland, 1981-2012PValue–to–Cash Rent RatioClimbing into New Territory!
  14. 14. What’s On The Horizon?Prevailing DroughtCutting Production?Increasing Input Costs?$5/Bu. Corn?
  15. 15. Cash Rent Market Trends More Moderate
  16. 16. Question:Are Tenants Taking onToo-High of Rents?Answer:MAYBE!
  17. 17. Depends on 2013 CommodityPrices and YieldsIf Paid $350/AC For Irrigatedand $220/AC Dryland CroplandIf Paid $350/AC for Irrigated and $220/AC Dryland Cropland
  18. 18. Summing Up:The Boom Years May Be OverReal Estate Meltdown Unlikely--But Some Readjustmenton the Horizon
  19. 19. THE OWNERSHIP AND SUCCESSION OFAGRICULTURAL LAND :Four Key Implications#1 Since agricultural production assets areextremely valuable: Approach ownership and succession from a professional(not personal) perspective Seek outside professional input• Appraisers• Attorneys• Accountants• Professional Farm Managers• Financial Planners• Etc.
  20. 20. KEY IMPLICATIONS CONT: Establish Goals/Objectives and an Associated Plan(with all Stakeholders involved)Are we managing and passing on:An Ongoing Farming Operation?orA Group of Assets?And if a Group of Assets,To Hold Together?orTo Be Parceled?
  21. 21. KEY IMPLICATIONS CONT:#2 Given the Highly-Dynamic Nature ofAgricultural Asset Values: Consider Business Transition/Succession as ongoing process Periodic Review and Updating Keep Current on Key Indicators: Income Generated Asset Values Leasing Arrangements Cash Rental Rates Government Programs Production LevelsNo Longer is Silence an Indicator of Trust;Nor is Honest Inquiry a sign of Mistrust
  22. 22. KEY IMPLICATIONS CONT.:#3 Since Farm Family Heirs Increasingly are choosing toretainownership of Agricultural Assets: Issues of Fairness and Equity are Paramount Appropriate Financial compensation for management roles playedby one or more members Where one family member is renting the family land, crop-shareleasing makes sense. Flexibility provisions for reconfiguring ownership among memberscritical.
  23. 23. KEY IMPLICATIONS CONT.:#4 Given High Levels of Acquired Wealth: Greater Opportunity (and tax incentives) for philanthropic objectives Providing an ongoing legacy beyond immediate familyTO:The Local CommunityThe Agricultural CommunityNebraska and Its Growing Agricultural Role in the 21stCentury“Nebraska is at the epicenter of global foodproduction”--- IANR Vice Chancellor Ronnie Green, 2011
  24. 24. THE FARM TRANSITION:NOT dividing up the spoils of ahard-working generation.BUT rather, passing on theheart and soul to the nextgeneration.“. . . and let us run with endurancethe race that is set before us.”Hebrews 12:1
  25. 25. Thank you

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