Nebraska Farm Real Estate Market Developments 2005-2006

Nebraska’s agricultural land values rose an average of 9.6 percent during the year ending February 1, 2006. This brought the state’s average all-land value to over $1,000 per acre and the total worth of agricultural real estate to more than $45 billion. In the wake of a series of generally favorable income years for most of the state’s agricultural sector, land values have advanced rather sharply over the past three years – particularly in the eastern third of the state. The three eastern districts have experienced value increases of 40 percent or more since February 2003. In contrast to these sharply higher values, some other areas of the state have experienced more moderate gains and even some value declines. This occurred in the South District during the year ending February1, 2006 where the all-land average value declined over four percent. The declines in that area were closely associated with the irrigation land classes. Likewise, gravity irrigated cropland in the Southwest district was down slightly for the year as expectations of future irrigation water availability remain uncertain in these areas. General market characteristics in 2005 were similar to those reported in recent years. Based on reporter information on 475 actual, representative sales, about half of all purchases were for cash with no debt financing, even though the average dollar value per transfer exceeded $300,000 in every district. About three of every five buyers was an active farmer/rancher. Nonfarm buyers reportedly had a significant presence in most local markets across the state; and their activity is seen as a contributing factor in the upward movement of land values. Despite large dollar jumps in petroleum-based farm inputs, cash rental rates for cropland in 2006 were not negotiated lower in most regions of Nebraska. In fact, some modest increases in 2006 cropland cash rental rates occurred in the eastern districts. This year, UNL reporters provided valuable insight into the dollar adjustments typically being made to average cash rental rates when the tenant is providing some of the irrigation system. The sharing of the irrigation system components is an increasing occurrence. Results of the 2006 UNL survey suggest that associated percentage net rates of return to agricultural land continue their gradual decline of several years duration. Current annual net rates of return are in the three to five percent range for much of the state’s agricultural land base