Economic Tidbits

Farm Real Estate Value Hits Record High

Nebraska’s average farm real estate value rose 13 percent over the past year, reaching a record high of $4,240 per acre (including the value of buildings) according to the USDA National Agricultural Statistics Service. This year’s increase comes on the tails of a 21 percent increase last year and an 11 percent increase in 2021 (Figure 1). Growth in values over the past 20 years has been unprecedented. If one had invested $10,000 in farm real estate in 2003, it would be worth almost $54,700 today, nearly 5.5 times the original investment. 

FIGURE 1. NEBRASKA AVERAGE FARM REAL ESTATE VALUE ($/Acre)

Source: USDA National Agricultural Statistics Service

The Plains states, including Nebraska, were the locus of the largest increases in values this year (Figure 2). Kansas topped the nation with an increase of slightly more than 16 percent followed by New Jersey at 14.9 percent. Next came North Dakota with an increase of 13.2 percent, Nebraska at 13.1 percent, and South Dakota, 12.3 percent. Nevada, Arizona, and New Mexico saw no change in values. Nationwide, prices rose 7.4 percent to an average per acre value of $4,080. The highest average value per acre is found in Rhode Island at $18,300. The lowest valued land is in New Mexico at $610 per acre. The estimated values are based on surveys of farmers. 

FIGURE 2. FARM REAL ESTATE VALUE, PERCENT CHANGE FROM 2021

Source: USDA National Agricultural Statistics Service

Nebraska’s average cropland value of $6,830 per acre was up 14 percent from 2022 and came on the heels of a 21 percent increase last year. Dryland crop ground increased 16 percent, equaling $5,500 per acre. The value of irrigated land rose 12 percent, swelling to $8,900 per acre. And pastureland posted an increase of 16 percent, averaging $1,440 per acre, up $200 per acre.

This year’s increase in the price of land is no fluke. Figure 3 plots the percentage changes in land values between 1971-2023. A couple items stand out. First, land values increased more often than they decreased. In 37 of 53 years, 70 percent, land values rose. Second, increases are likely to exceed 10 percent. Upsurges of at least 10 percent occurred in 22 years, 41 percent of the time. In fact, values surged by more than 20 percent in 7 years. Years with downturns occur, but rarely are they large. In only 2 of 52 years did values decrease by more than 10 percent. 

FIGURE 3. AVERAGE PERCENTAGE CHANGE IN NEBRASKA REAL ESTATE VALUE

Source: USDA National Agricultural Statistics Service

The USDA is not the only entity reporting higher land values. A University of Nebraska survey in February found land values were up 14 percent. A Federal Reserve Bank of Kansas City second quarter survey of commercial bankers found land values were up 8 percent in its region which includes Nebraska. Tidbits projected last year double-digit growth in land prices would not continue, arguing high input costs, higher interest rates, and drought would weigh on the market. Clearly Tidbits was wrong. But if one doesn’t succeed, try, and try again. Again, this year, it is difficult to foresee continued double-digit growth in land prices. Values will not soften, but the rate of growth should. But before taking this to the bank, remember economists and weather forecasters are two professions that can be wrong most of the time and keep their jobs.

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