Nebraska Farm and Ranch Land
Values
Jessica Johnson
Asst. Extension Educator, Agricultural Economics
Panhandle Research an...
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 ...
Average Value of Nebraska
Farmland, % Change from 2013
Northwest
$855/ac
20%
North
$1,220/ac
20%
Northeast
$6,460/ac
4%
So...
Annual Comparison
Agricultural
Statistics
District
2014 All-Land
Average Value
Dollars/Acre
2011-2012
% change
2012-2013
%...
2013/2014 Area Land Values
Land type Northwest North Southwest
Dryland – no
potential
845 21 1720 49 1965 28
Dryland – irr...
Land as an Investment
2014 Annual Net Rates of
Return to Land
6.2
3.5
4.0
2.1
8.3
4.6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1990 1995 2000 200...
2014 Land Sales
Statewide Northwest North
Cash Sales 45% 75% 50%
Mortgage 53% 23% 50%
Purchase by an Active
Farmer/Rancher...
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
Northea...
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 2...
Reported Cash Rental Rates: Center Pivot
Irrigated Cropland
2014 Average %
Change
High Low
Northwest 200 -11 240 150
North...
2013 Nebraska Irrigated
Cropland Rates Paid Per Acre
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
RentPerAcre
Cash Rental Rates for the Northwest District
Dryland Gravity Irri...
Reported Cash Rental Rates 2013:
Pasture
Average %
Change
High Low
Northwest 10 -23 15 5
North 25 56 35 15
Northeast 70 32...
2014 Pasture Rents – by cow/calf
pair per month
Northwest North Southwest
Average 32.30 48.55 45.45
High 43.55 69.45 59.45...
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...
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...
Quick calculation of farmland
leases
• Roughly 30% of the gross income should
go to landlord
– Comes from 30-70 split of c...
Pasture Leases
• Runs from May 1 to October 1 (5-month
period)
• Includes the legal description of the land
• Shows in and...
Pasture Lease Considerations
• Stocking rate by head, AUM, pairs,
frame, weight, color…
– Pasture inspection: owner, 3rd p...
Determining Pasture Rents
• From per acre to per pair/month
Assume going per acre rent in SB county is $10
– Scotts Bluff ...
Resources
• UNL Nebraska Farm Real Estate Survey
http://agecon.unl.edu/realestate.html
Updated in June
• http://AgLease101...
Office: 308-632-1247
go.unl.edu/pagecon
jjohnson@unl.edu
PanhandleAgEcon
Extension is a Division of the Institute of Agric...
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2014 Nebraska Farm and Ranch Land Values

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Final data on 2014 ag land value trends in Nebraska, especially the Panhandle, compiled by University of Nebraska-Lincoln. Presentation by Jessica Johnson, Extension Educator - Ag Economics, UNL Panhandle Research and Extension Center.

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2014 Nebraska Farm and Ranch Land Values

  1. 1. Nebraska Farm and Ranch Land Values Jessica Johnson Asst. Extension Educator, Agricultural Economics Panhandle Research and Extension Center
  2. 2. Discussion • Land Value Trends • Land as an Investment • Cash Rental Rates • Lease Agreements
  3. 3. Land Value Trends
  4. 4. Real Land Value Increase
  5. 5. 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?)
  6. 6. 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/ac 8% East $7,285/ac 0.3% State Average $3,315/ac 9% Source: Annual UNL Nebraska Farm Real Estate Market Surveys South $4,815/ac 9%
  7. 7. Annual Comparison Agricultural Statistics District 2014 All-Land Average Value Dollars/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
  8. 8. 2013/2014 Area Land Values Land 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
  9. 9. Land as an Investment
  10. 10. 2014 Annual Net Rates of Return to Land 6.2 3.5 4.0 2.1 8.3 4.6 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 1990 1995 2000 2005 2010 Dryland Cropland Grazing Land Irrigated Land Nebraska Farm Real Estate Highlights Pg. 7-9
  11. 11. 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
  12. 12. Cash Rental Rates UNL vs. USDA
  13. 13. 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 1 225 130 Source: Nebraska Farm Real Estate Market Highlights 2013-2014 Pg. 13
  14. 14. 2013 Nebraska Dryland Cropland Rates Paid Per Acre
  15. 15. 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 -1 355 235 Source: Nebraska Farm Real Estate Market Highlights 2013-2014 Pg. 13
  16. 16. 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 -3 415 265 Source: Nebraska Farm Real Estate Market Survey 2013-2014 Pg. 13
  17. 17. 2013 Nebraska Irrigated Cropland Rates Paid Per Acre
  18. 18. $0.00 $50.00 $100.00 $150.00 $200.00 $250.00 RentPerAcre Cash Rental Rates for the Northwest District Dryland Gravity Irrigated Center Pivot Irrigated
  19. 19. 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 40 Source: Nebraska Farm Real Estate Highlights 2013-2014 Pg. 13
  20. 20. 2014 Pasture Rents – by cow/calf pair per month Northwest North Southwest Average 32.30 48.55 45.45 High 43.55 69.45 59.45 Low 29.15 39.65 39.90 Source: Nebraska Farm Real Estate Market Highlights Pg. 14
  21. 21. 2013 Nebraska Pasture Rent Paid per Acre
  22. 22. 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
  23. 23. Rental Rate Secret WHATEVER THE LANDLORD IS WILLING TO ACCEPT AND THE TENANT IS WILLING TO PAY
  24. 24. Lease Agreements
  25. 25. 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?
  26. 26. 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
  27. 27. 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
  28. 28. 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
  29. 29. 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
  30. 30. Resources • UNL Nebraska Farm Real Estate Survey http://agecon.unl.edu/realestate.html Updated in June • http://AgLease101.org – Example Written Lease Agreements • USDA NASS NE Office, Charts & Maps http://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
  31. 31. Office: 308-632-1247 go.unl.edu/pagecon jjohnson@unl.edu PanhandleAgEcon Extension is a Division of the Institute of Agriculture and Natural Resources at the University of Nebraska-Lincoln cooperating with the Counties and the U.S. Department of Agriculture. University of Nebraska-Lincoln Extension educational programs abide with the non- discrimination policies of the University of Nebraska-Lincoln and the United States Department of Agriculture. Get current Panhandle price & basis information TEXT “@UNLPREC” to 651-968-8358 Standard message & data rates apply.
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