ND Farmland Values Continue to Grow
(Farm & Ranch) Farmland real estate values increased by 3.8 percent during the past year, according to a report released by the North Dakota field office of the USDA’s National Ag Statistics Service (NASS). This increase brought the average value of farmland in the state to $810 per acre, with the average cropland value pegged at $820 per acre, an increase of 2.5 percent from 2009 and pasture land at $370, a 5.7 percent increase.
According to the NASS report, farmland values in the state have continually increased for the past 11 years. The farm real estate value is a measurement of the value of all land and buildings on farms and ranches.
Renting cropland in North Dakota was also more expensive in 2010, with the average price at $46.50 per acre, a 2.2 percent increase from 2009 and 9.4 percent higher than in 2008. However, cash rent for pasture land fell by a dollar from 2009 to $13 per acre in 2010. This compares to a cash rent figure of $13.50 in 2008.
The small increase in land values and cash rental rates didn’t come as a surprise to Andy Swenson, NDSU Extension farm management specialist, who attributes the continued increase in both areas to the robust farm economy in 2007 and 2008. And the string of 11 years of continued increases in land values isn’t out of the ordinary, either.
“Going back over the past 100 years there have been two periods that had long, continuous strong periods of increasing land values,” he said. “The first was an eight-year period ending in 1949, and in those eight years there was an average annual increase of about 10 percent.
“There was a nine-year period, starting in 1973 and going until 1981 when the average annual increase was 18 percent. But that was followed by a decline in land values until around 1989.”
Both farmland values and cash rent levels are an indicator of how the ag economy is performing, Swenson noted.
“They go hand in hand, but historically cash rents will lag land values - land values will shoot up more quickly on a percentage basis. But when land values drop, there is a lag in cash rents dropping,” he said. “But both are an indicator of how the ag economy is doing, but typically the land rents will react a little slower.
On a national basis, the average farmland value was $2,140 per acre and increase of 1.4 percent from last year. Cropland values increased by $30 per acre to $2,700 and in the Northern Plains region the average cropland value increased 6.9 percent from the previous year, the highest increase for any region. States in the Northern Plain region include North and South Dakota, Nebraska and Kansas. North Dakota had the lowest percentage of increase in the region, while Nebraska’s cropland value jumped 10.6 percent
Pasture values in the nation remained unchanged from 2009 at $1,070 per acre.
Cash rents per acre paid to landlords for cropland in 2010 rose $3, or 3 percent, while pasture rental rates remained unchanged. Cropland cash rents averaged $102 per acre, compared to $99 for 2009. Pasture cash rents averaged $11 per acre.
The increase in cropland rental rates are the result of producers receiving strong commodity prices, the service noted, while pasture cash rents is affected less by commodity prices and more by land values.
“It’s also important to note that agricultural land has been seen as a solid investment versus a lot of other investments that aren’t considered very solid right now,” Swenson added. “Land has been considered a decent investment and that is one of the things that have been underpinning its value.
“And the continued low interest rates has a double plus effect for land as well. One is interest rates on competing investments are down and that makes land look better. And for those who have to purchase land with debt capital, it makes the cost of purchasing land effectively less. So I think interest rates are an important factor.
“If they start to go high, it will have a negative effect on land values, but right now they are at historic lows and it looks like they will be low for a while yet, at least until the economy picks up.”
Swenson pointed out that the biggest buyers of land is still agricultural producers and they’re ability to purchase land definitely improved after the highly profitable years of 2007 and 2008. He noted that the crop budgets looked rather tight at the start of this growing season, but with the recent rallies in commodity prices and the prospects for another good crop in the region it’s looking pretty positive for farmers again. And that combination could prove to be positive for land prices in the future.
http://www.farmandranchguide.com/articles/2010/08/12/ag_news/regional_news/news11.txt
According to the NASS report, farmland values in the state have continually increased for the past 11 years. The farm real estate value is a measurement of the value of all land and buildings on farms and ranches.
Renting cropland in North Dakota was also more expensive in 2010, with the average price at $46.50 per acre, a 2.2 percent increase from 2009 and 9.4 percent higher than in 2008. However, cash rent for pasture land fell by a dollar from 2009 to $13 per acre in 2010. This compares to a cash rent figure of $13.50 in 2008.
The small increase in land values and cash rental rates didn’t come as a surprise to Andy Swenson, NDSU Extension farm management specialist, who attributes the continued increase in both areas to the robust farm economy in 2007 and 2008. And the string of 11 years of continued increases in land values isn’t out of the ordinary, either.
“Going back over the past 100 years there have been two periods that had long, continuous strong periods of increasing land values,” he said. “The first was an eight-year period ending in 1949, and in those eight years there was an average annual increase of about 10 percent.
“There was a nine-year period, starting in 1973 and going until 1981 when the average annual increase was 18 percent. But that was followed by a decline in land values until around 1989.”
Both farmland values and cash rent levels are an indicator of how the ag economy is performing, Swenson noted.
“They go hand in hand, but historically cash rents will lag land values - land values will shoot up more quickly on a percentage basis. But when land values drop, there is a lag in cash rents dropping,” he said. “But both are an indicator of how the ag economy is doing, but typically the land rents will react a little slower.
On a national basis, the average farmland value was $2,140 per acre and increase of 1.4 percent from last year. Cropland values increased by $30 per acre to $2,700 and in the Northern Plains region the average cropland value increased 6.9 percent from the previous year, the highest increase for any region. States in the Northern Plain region include North and South Dakota, Nebraska and Kansas. North Dakota had the lowest percentage of increase in the region, while Nebraska’s cropland value jumped 10.6 percent
Pasture values in the nation remained unchanged from 2009 at $1,070 per acre.
Cash rents per acre paid to landlords for cropland in 2010 rose $3, or 3 percent, while pasture rental rates remained unchanged. Cropland cash rents averaged $102 per acre, compared to $99 for 2009. Pasture cash rents averaged $11 per acre.
The increase in cropland rental rates are the result of producers receiving strong commodity prices, the service noted, while pasture cash rents is affected less by commodity prices and more by land values.
“It’s also important to note that agricultural land has been seen as a solid investment versus a lot of other investments that aren’t considered very solid right now,” Swenson added. “Land has been considered a decent investment and that is one of the things that have been underpinning its value.
“And the continued low interest rates has a double plus effect for land as well. One is interest rates on competing investments are down and that makes land look better. And for those who have to purchase land with debt capital, it makes the cost of purchasing land effectively less. So I think interest rates are an important factor.
“If they start to go high, it will have a negative effect on land values, but right now they are at historic lows and it looks like they will be low for a while yet, at least until the economy picks up.”
Swenson pointed out that the biggest buyers of land is still agricultural producers and they’re ability to purchase land definitely improved after the highly profitable years of 2007 and 2008. He noted that the crop budgets looked rather tight at the start of this growing season, but with the recent rallies in commodity prices and the prospects for another good crop in the region it’s looking pretty positive for farmers again. And that combination could prove to be positive for land prices in the future.
http://www.farmandranchguide.com/articles/2010/08/12/ag_news/regional_news/news11.txt
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