Category Archives: farmland values and rents

U.S. Farmland Price Change Map 2005 to 2013

source: Rabobank
As this map so clearly demonstrates, the recent run up in farmland prices had a lot to do with ethanol policy which had a sudden upward push on corn prices and a ripple effect on the other commodities. It especially added value to land with “potential” – potential to be plowed (think Dakotas) or irrigated (think Nebraska), maybe even land with the potential for warmer weather due to a changing climate (think Dakotas again), all with a guaranteed profit through crop insurance (and direct payments) financed by your friendly taxpayer. In comparison to the rest of the nation, the Midwest corn belt saw the greatest movement upward in farmland prices since 2005.

With government policies supporting both the production and the income of the corn crop for growers, cropland purchasers over the past seven or eight years have seen the income potential from cropland as a much better bet than zero bound interest rate agreements. And, in an efficiency-driven system that rewards the big for getting bigger, some land owners took their recent year’s farm profits and reinvested them to buy neighboring farmland when available.

As I see it, buying farmland is a very long term hold, so given that policy can change, there are no guarantees that these investments will remain profitable, especially given the complicating issues of changing government regulations and subsidy systems, pollution concerns, water, super weeds, rising input costs, qualified labor, rural demographic issues, and consumers who are revolting against GMO crops and foods. It has always been my opinion that cropland investors, through investment vehicles, are naive about the nature of both farming and investing in farmland – if they are thinking it is a sure bet.

Ernie Goss, in his July report, tells us that the bank CEOs which he interviewed expect land prices to fall by 4.8 percent over the next 12 months, an increase from a rate of decline of 3.2 percent that was expected earlier this year.

This all comes as no surprise, as commodity prices have fallen in price with this season’s bumper crops. Farmland will follow.

Hint: The best future indicator for prices of farmland and commodities themselves can be summed up in two words: Biofuels policies… in the U.S. and everywhere.

Because, in the developed nations, we are still dealing with overproduction, hardly a surefire indicator for buying cropland.

Only from biofuels policies are nations creating new demand to utilize a significant percent of this excess crop production and drive up prices enough to cover their input costs. Through biofuels induced domestic consumption, through the export of biofuels and biofuel related products, and through the tweaking of biofuels policies from year-to-year, perhaps a “swing demander” has emerged for the commodity crops.

What’s Going on with Nebraska Panhandle Farmland Prices?

As the rest of the Midwest’s farmland valuations are cooling off, the Panhandle of Nebraska is on fire.

Jessica Johnson, Extension Educator at the UNL Panhandle Research and Extension Center has provided the following assessment of the situation. (It’s mostly about irrigation and tilling potential of land.) Also, this year’s farmland prices data is showing pastureland to be doing well as compared to other categories.

Farmland values in the Nebraska Panhandle continue to climb, according to results of the annual Nebraska Farm Real Estate Survey released in June. The results reveal that in 2014, the average statewide value of farmland increased 9 percent to $3,315 per acre. In the Panhandle, the average farmland value increased 20 percent to $855 per acre.

Several factors have contributed to rising land values in recent years, including record high farm income, low interest rates, expanding operations, and limited land sales. Even though some of these factors are still in play, the downturn in commodity prices led to more modest increases in statewide cropland values in 2014.

The value of gravity-irrigated cropland in the Panhandle increased 6 percent, consistent with the statewide average for this land class. Center-pivot-irrigated cropland in the Panhandle increased 21 percent to $3,770 per acre. The Panhandle district reported the highest percentage increase for center-pivot-irrigated cropland.

Dryland cropland also showed significant increases from 2013. Dryland cropland with no irrigation potential increased 21 percent to $845 per acre. Dryland cropland with irrigation potential increased 28 percent to $935 per acre. The survey indicated that lingering effects of drought, the conversion of grazing land to cropland, and higher cattle prices could be factors driving up grazing and hayland values.

Non-tillable grazing land increased 9 percent in the Panhandle to $405 per acre. The Panhandle had the lowest reported increase of this land class in the state. Tillable grazing land had an increase of 29 percent to $550 per acre. Hay land had the largest increase of any land class in the Panhandle with a change of 31 percent from 2013 to 2014, resulting in an average hay land value of $1,025 per acre.

USDA’s Annual Farmland Prices Report Is Out

The annual Farmland prices report which comes out every August, has been released by the USDA.

Here are the report’s highlights (emphasis mine – and be sure to look at the Dakotas!):

The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $2,950 per acre for 2014, up 8.1 percent from 2013 values. Regional changes in the average value of farm real estate ranged from a 16.3 percent increase in the Northern Plains region to 1.1 percent increase in the Southeast region. The highest farm real estate values were in the Corn Belt region at $6,370 per acre. The Mountain region had the lowest farm real estate value at $1,070 per acre.

The United States cropland value increased by $290 per acre (7.6 percent) to $4,100 per acre from the previous year. In the Northern Plains region, the average cropland value increased 13.6 from the previous year. However, in the Mountain region, cropland values decreased by 5.1 percent.

The United States pasture value increased to $1,300 per acre, or 11.1 percent above 2013. The Southeast region had the smallest percentage increase in pasture value, 0.5 percent above 2013. The Northern Plains had the highest increase at 26.5 percent.

And next, a key map and chart with state and regional price change figures from the report:

To view the entire PDF report go here:

Why Missouri? Its Farmland Appreciated Most in Latest Tenth District Report.

The third quarter agricultural credit conditions report has been released from the Kansas City Federal Reserve Bank, which covers the region that includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico. Of interest from the quartly report always, is the report on farmland prices from the district.

As you can see from this current report chart (above) showing farmland price gains in percent change from the previous year, the three highest blocks are 1) nonirrigated (western) Missouri (up 27.2%), 2) irrigated Oklahoma (up 23.6%), and 3) nonirrigated Kansas (up 22.5%).

Much of recent-year farmland price appreciation has come from the lands that are best suited for growing cash crops of corn or soybeans, ever since the RFS ethanol mandate quickly drove up new demand for corn.

Could it be that we are now seeing a shift in demand for other types of farmland?

I don’t have the answer, as I’d need to see which lands have sold in those three states, but it would seem a logical and possible trend to watch going forward.


3rd Quarter 2013: Federal Reserve Bank of Chicago Farmland Price Report

Note that the Seventh District is made up of the northern portions of Illinois and Indiana, southern Wisconsin, the Lower Peninsula of Michigan, and the state of Iowa.

● On a year-over-year basis, farmland values in the Seventh Federal Reserve District gained 14 percent in the third quarter of 2013.

● On a quarterly basis, the District’s agricultural land values saw a gain of 1 percent in the third quarter of 2013 after recording no increase in the previous quarter.

● The USDA predicted that the five District states’ harvest of corn for grain would be 38 percent greater than the drought-reduced harvest of 2012.

● For the five District states, soybean production was projected by the USDA to rise 8.5 percent in 2013 from its 2012 level.

● Even with the reoccurrence of drought in parts of the District, the third-largest corn harvest and soybean harvest just outside the top ten filled storage bins across the Midwest.

Exports of Corn, Soybeans and Wheat from the District

I excerpted the export portion of this chart (above) to show the dramatic change in numbers for corn, soybeans and wheat from this district over one and two years ago. Though the dollar amount values for the combined three commodities haven’t changed dramatically, the bushel amounts sure have – with corn and soybeans falling and wheat rising. (The USDA and BLS like to report dollar amounts, and the bushel amounts are less frequently seen.)