2023 Land Values Set Record High
The average value for agricultural land in Nebraska increased 14 percent over the past year according to preliminary numbers released by the University of Nebraska Agricultural Economics Department. This year’s average value, $3,360 per acre, is the highest in the 45-year history of the survey, exceeding the record set last year (Figure 1). The increase marks the second consecutive year land values have experienced double-digit growth. The figures come from the department’s annual survey of land appraisers, farm and ranch managers, agricultural bankers, and other real estate professionals.
Figure 1. Nebraska Average Land Values, 1979-2023
Source: UNL Nebraska Farm Real Estate Market Surveys, 1979-2023
Market values for non-irrigated cropland rose on average between 13-16 percent, center pivot irrigated cropland increased 13 percent, gravity irrigation land rose 12 percent, and grazing land perked up 14-17 percent. Eastern Nebraska saw the largest increases in values, ranging from 16-17 percent (Figure 2). Survey respondents said land rental rates are higher too. Cropland rates rose 7-11 percent and pasture rates rose 6-7 percent. Improved crop and livestock prices, purchases for expansion, financial health of producers, and land purchases as a hedge against inflation were cited as factors in the double-digit growth in values.
Figure 2: Average Land Values in 2023 & Percentage Changes from 2022
Source: UNL Nebraska Farm Real Estate Market Surveys, 1979-2023
The increases in land prices reported by UNL mimic those reported by the Federal Reserve Bank of Kansas City in its survey of commercial bankers late in 2022. The Federal Reserve reported the average value for non-irrigated land in the Tenth District was 9 percent higher compared to the prior year, irrigated land was 15 percent higher, and ranchland was up 17 percent. Farmer purchases are driving the hikes. According to survey responses, more than 80 percent of the farmland purchased in Nebraska in 2022 was purchased by farmers. Bankers also said the volume of sales in 2022 was higher compared to previous years.
Prices for land have risen despite the rise in interest rates. Economists for the Kansas City Federal Reserve Bank write “average farm loan interest rates increased more than 150 basis points since the Federal Funds Rate increased from near zero early in 2022.” Interest rates on farm loans are at the highest level seen since 2007. Commercial bankers expect higher rates will temper land prices over the next year. Thirty percent of bankers surveyed by the Kansas City Federal Reserve Bank expect lower values. Thirty percent expect higher values. A slight majority expected no change.
More on the UNL report, authored by Jim Jansen, an agricultural economist with Nebraska Extension, and Jeffrey Stokes, a professor in the Department of Agricultural Economics, can be found at: https://agecon.unl.edu/cornhusker-economics/2023/NEFmRealEstate_2023.pdf
