Cornhusker Economics Mar. 16, 2022
2022 Nebraska Farmland Values and Cash Rental Rates
The market value of agricultural land in Nebraska increased by 16% over the prior year to an average of $3,360 per acre, according to the 2022 Nebraska Farm Real Estate Market Survey (Figure 1 and Table 1). This marks the largest increase in the market value of agricultural land in Nebraska since 2014 and is the highest non-inflation-adjusted state-wide land value in the history of the survey.
Figure 1. Historic Nebraska Average Land Value, Selected Years 1978-2022
| Type of Land | Agricultural Statistics District | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Northwest | North | Northeast | Central | East | Southwest | South | Southeast | Statec | |
| Dollars Per Acre | |||||||||
| Dryland Cropland (No Irrigation Potential) | |||||||||
| $/acre | 745 | 1,830 | 6,965 | 3,540 | 7,525 | 1,560 | 3,485 | 5,515 | 3,900 |
| % Change | 17 | 11 | 21 | 15 | 16 | 8 | 14 | 12 | 15 |
| Dryland Cropland (Irrigation Potential) | |||||||||
| $/acre | 855 | 2,245 | 7,485 | 3,855 | 8,470 | 1,775 | 4,145 | 6,695 | 5,235 |
| % Change | 12 | 7 | 20 | 9 | 24 | 10 | 15 | 18 | 19 |
| Grazing Land (Tillable) | |||||||||
| $/acre | 625 | 1,370 | 3,645 | 2,160 | 3,915 | 1,055 | 2,290 | 3,265 | 1,475 |
| % Change | 16 | 15 | 12 | 10 | 16 | 11 | 15 | 9 | 13 |
| Grazing Land (Nontillable) | |||||||||
| $/acre | 510 | 745 | 2,470 | 1,685 | 2,720 | 825 | 1,575 | 2,510 | 950 |
| % Change | 15 | 7 | 16 | 13 | 6 | 9 | 8 | 17 | 10 |
| Hayland | |||||||||
| $/acre | 830 | 1,370 | 3,475 | 2,225 | 3,470 | 1,535 | 2,085 | 3,125 | 1,895 |
| % Change | 7 | 14 | 8 | 12 | 13 | 17 | 9 | 11 | 12 |
| Gravity Irrigated Cropland | |||||||||
| $/acre | 2,520 | 4,205 | 8,960 | 7,015 | 9,440 | 4,155 | 6,865 | 7,630 | 7,055 |
| % Change | 13 | 11 | 22 | 14 | 17 | 10 | 19 | 14 | 16 |
| Center Pivot Irrigated Croplandb | |||||||||
| $/acre | 3,065 | 4,890 | 10,135 | 8,105 | 10,920 | 4,900 | 7,780 | 9,985 | 7,735 |
| % Change | 19 | 14 | 24 | 12 | 15 | 18 | 13 | 19 | 17 |
| All Land Averagec | |||||||||
| $/acre | 825 | 1,290 | 6,950 | 3,810 | 8,110 | 1,805 | 4,375 | 6,070 | 3,360 |
| % Change | 15 | 11 | 21 | 12 | 19 | 13 | 15 | 16 | 16 |
bValue of pivot not included in per-acre value.
cWeighted averages.
The University of Nebraska-Lincoln’s Department of Agricultural Economics annually surveys land industry professionals across Nebraska, including appraisers, farm and ranch managers, agricultural bankers, and related industry professionals. Results from the survey are divided by land class and summarized by the eight Agricultural Statistic Districts of Nebraska (Figure 2).
Figure 2. Nebraska Agriucultural Statiscics Districts
As part of the annual survey, land industry professionals reported the rise in Nebraska agricultural land values were attributed to higher commodity prices, interest rates near historic lows, hedging against inflation, and a renewed use in 1031 exchanges. The financial position of many operations improved over the prior year despite rising machinery costs and input expenses. Current interest rate levels created a strong market as investors turned to land as a tangible investment as a hedge against inflation. Proposals to change capital gains taxes also spurred the usage of 1031 exchanges.
Policies put forward to stem the effects of COVID-19 led to federal disaster assistance for the agricultural sector, along with an extended period of low interest rates. The tapering back of disaster assistance was offset by higher crop and livestock income across Nebraska in 2021 (Lubben, 2022). The outlook for 2022 also appears favorable as commodity prices continue to rise, but the impact of higher input costs and intensifying drought across the state are causes for concern (Kauffman & Kreitman, 2022). The resulting income, liquidity, and credit positions remain favorable across many operations.
Higher income, coupled with historically low interest rates, led to the robust real estate sales markets. Interest rates for operating, intermediate, and real estate debt in 2021 averaged approximately 100 basis — or 1% — lower than the historic average from 2015 to 2019. The average real estate debt for land loans averaged about 4.5% across states located in the Tenth District of the Federal Reserve Bank of Kansas City (Scott & Kreitman, 2022). Real estate purchasers capitalized on these favorable financing terms.
Uncertainty posed by investment taxation and inflation bolstered the use of 1031 exchanges when moving capital between assets. Investors and operators acquired land as a hedge against changes to policy and economic uncertainty. Overseas conflict leading to input shortages and higher expenses remains a challenge for navigating 2022. Favorable financial positions, lending terms, and stability of land as an investment, created a competitive real estate marketing across Nebraska, according to survey participants.
Cropland represented the highest market value increase for Nebraska for 2022 when compared to the prior year (Table 1). The estimated market value of dryland cropland with irrigation potential rose by 19% across the state. Districts in the Northeast, East, and Southeast increased by about 18% to 24%. The other five districts averaged increases ranging from 7% to 15%. Dryland cropland without irrigation potential followed similar trends as the Northwest, Northeast, Central, and East, reporting increases ranging from 15% to 21%, and the other regions improving from about 8% to 14%.
Center pivot irrigated cropland averaged 17% higher year over year, with the Northwest, Northeast, Southwest, and Southeast leading the state between 18% and 24%. The North and East reported gains of 14% and 15%, while the Central and South rose between 12% to 13%. Higher commodity prices also translated into gravity irrigated cropland averaging 16% higher in 2022. The Northeast and South gains were between 19% and 22% for this land class. Dry conditions across the state, along with higher commodity prices, contributed to continued strong demand for the irrigated land classes.
Gains in the hayland and grazing land markets range from 10% to 13%. Grazing land tillable once again led the three land classes at 13% as operators seek additional acres to develop with higher commodity prices. The major grazing and hayland districts — Northwest, North, Central, and Southwest — reported increases from about 10% to 15%. Policies guiding the development of grazing or hayland into cropland have limited the ability to initially participate in purchasing federally subsided crop insurance or participating in USDA farm programs.
Cropland cash rental rates trended higher in 2022 over the prior year (Table 2). Survey participants indicated crop prices as the major factor leading to the growth in rental rates. Higher planting time crop insurance price guarantees led to larger revenue guarantees. Producers have the ability to insure a greater level of revenue but face higher premiums and input expenses. Overseas conflict has disrupted trade patterns for commodities and critical crop inputs. The use of flexible leases in 2022 may better mitigate this risk and derive cash rental rates better reflecting economic forces.
Dryland and irrigated cropland cash rental rates in 2022 trended up, averaging about 10% to 15% higher than the prior growing season. Irrigated cash rental rates assume that the landlord owns the entire irrigation system. These rates would be adjusted down to reflect the tenant providing a component to the irrigation system. Extensive drought and heightened input expenses such as fertilizer and crop chemicals were reported as concerns expressed by survey participants for the upcoming growing season. Flexible leases accounting for actual crop revenue and expenses may be a feature to consider in negotiated rental leases.
Grazing land and cow-calf pairs rental rates trended steady to higher across Nebraska in 2022 (Table 2). These rates increased about 6% to 8% over the prior year. Drought poses a threat to grazing land without additional rainfall over the upcoming growing season. Negotiating early removal provisions should be accounted for as part of the cash rental rate subject to drought conditions.
| Type of Land | Agricultural Statistics District | |||||||
|---|---|---|---|---|---|---|---|---|
| Northwest | North | Northeast | Central | East | Southwest | South | Southeast | |
| Dollars Per Acre | ||||||||
| Dryland Cropland | ||||||||
| Average | 33 | 65 | 245 | 120 | 235 | 49 | 100 | 190 |
| % Change | 11 | 15 | 9 | 22 | 7 | 18 | 20 | 12 |
| High Third Quality | 45 | 98 | 290 | 145 | 275 | 67 | 130 | 235 |
| Low Third Quality | 27 | 50 | 195 | 105 | 185 | 39 | 78 | 160 |
| Gravity Irrigated Cropland | ||||||||
| Average | 130 | 195 | 300 | 245 | 285 | 180 | 245 | 260 |
| % Change | 13 | 8 | 7 | 14 | 10 | 6 | 17 | 9 |
| High Third Quality | 165 | 230 | 355 | 275 | 320 | 205 | 275 | 315 |
| Low Third Quality | 105 | 170 | 245 | 190 | 250 | 160 | 210 | 230 |
| Center Pivot Irrigated Croplandb | ||||||||
| Average | 175 | 230 | 340 | 275 | 330 | 225 | 280 | 315 |
| % Change | 16 | 9 | 11 | 17 | 14 | 15 | 19 | 13 |
| High Third Quality | 210 | 280 | 390 | 335 | 365 | 270 | 330 | 345 |
| Low Third Quality | 140 | 195 | 285 | 225 | 290 | 180 | 245 | 265 |
| Pasture | ||||||||
| Average | 14 | 30 | 69 | 41 | 55 | 25 | 40 | 53 |
| % Change | 7 | 11 | 4 | 9 | 6 | 12 | 5 | 8 |
| High Third Quality | 19 | 43 | 89 | 56 | 71 | 32 | 49 | 64 |
| Low Third Quality | 11 | 17 | 52 | 33 | 44 | 19 | 30 | 41 |
| Dollars Per Month | ||||||||
| Cow-Calf Pair Monthly Ratesc | ||||||||
| Average | 43.15 | 67.05 | 65.80 | 61.45 | 58.35 | 56.70 | 51.20 | 57.40 |
| % Change | 9 | 6 | 8 | 4 | 6 | 10 | 3 | 5 |
| High Third Quality | 48.50 | 73.65 | 76.25 | 71.40 | 68.25 | 60.90 | 63.85 | 67.35 |
| Low Third Quality | 35.85 | 56.10 | 52.35 | 47.95 | 49.30 | 48.75 | 40.15 | 44.95 |
bCash rents on center pivot land assumes landowners own total irrigation system.
cA cow-calf pair is typically considered to be 1.25 to 1.30 animal units (animal unit being 1,000 lb. animal) for a five month grazing season. However, this can vary depending on weight of cow and age of calf.
The degree of service provided by the landlord or tenant influences the cow-calf pair rental rates paid as part of the lease. Factors to consider in the lease include the responsibility of fencing upkeep, control of brush or noxious weeds, and payment of utility bills associated with livestock wells. High third and low third quality cash rental rates in Table 2 account for some of these negotiated lease provisions.
Land values and rental rates presented in this report are averages of survey participants’ responses by district. Actual land values and rental rates may vary depending upon the quality of the parcel and local market for an area. Also, preliminary land values and rental rates are subject to change as additional surveys are returned. Final results from the survey will be published in June 2022 and available online via the Nebraska Farm Real Estate website: http://cap.unl.edu/realestate
Please address questions regarding preliminary estimates from the 2022 Nebraska Farm Real Estate Survey to Jim Jansen at (402) 261-7572 or jjansen4@unl.edu.
PDF
Jim Jansen, (402) 261-7572
Agricultural Economist
University of Nebraska-Lincoln
jjansen4@unl.edu
Jeffrey Stokes, (402) 472-2127
Professor
University of Nebraska-Lincoln
jeffrey.stokes@unl.edu
References
Kauffman, N., & Kreitman, T. (2022, February 24). Farm Real Estate Values Continue Rapid Climb, retrieved March 3, 2022, from the Kansas City FED
Lubben, B. (2022, March) Nebraska Farm Financial Income Forecasts, retrieved March 3, 2022 from the UNL Bureau of Business Research
Scott, F., & Kreitman, T. (2022, February 10). Rise in Farm Real Estate Values Accelerates, retrieved March 4, 2022, from the Kansas City FED