Nebraska Near Top for Land Value Increases

Nebraska experienced the largest increase in average land value over the past year of any major agriculture producing state according to the USDA National Agricultural Statistics (NASS). In fact, Nebraska’s growth in value was second only to Massachusetts. Nebraska’s average value, $3,100 per acre (including buildings on farms), rose 11 percent compared to last year, only $20 per acre shy of the record high of $3,120 set in 2014. Land values across the U.S. grew 7 percent on average, the largest since 2014. Other states posting double-digit growth were Kansas and Oregon. Texas, Iowa, and South Dakota nearly hit double-digits, experiencing growth of 9 percent.

Figure 1. 2021 Real Estate Value ($/acre & % Change from 2020)

Nebraska’s average cropland value of $4,980 was up nearly 14 percent from 2020 (Figure 2). Only Kansas posted a higher increase. Dryland crop ground in Nebraska posted an increase of over 15 percent, rising to $3,990 per acre. Irrigated land saw an increase of just over 12 percent, swelling to $6,530 per acre. Pastureland lagged crop ground but still posted an increase of just under 4 percent, growing to $1,080 per acre.

Figure 2. 2021 Cropland Value ($/acre & % Change from 2020)

In looking at past years, this year’s growth in land value is not unusual for Nebraska. Figure 3 plots the percentage changes in average land values between 1971-2021. A few items stand out. First, land values are more likely to rise than not. In 35 of the 51 years, or 69 percent of the time, land values rose. Second, annual increases were likely to be at least 10 percent or more. Upturns of 10 percent occurred in 20 years, 57 percent of the time when increases occurred or nearly 40 percent of the time over the entire period. Values even grew by more than 20 percent in six years. Finally, years with corrections in values occur, but in only two years or 4 percent of the time, were values down by more than 10 percent. Nebraska land values are sticky. When corrections occur, they are usually modest in nature.

Figure 3. Average Percentage Change in Nebraska Land Value, 1971-2021

The growth in land values this year are the sharpest seen in several years. Obviously higher commodity prices and greater returns for crop producers are moving cropland values higher. At the same time, financial struggles for cow/calf producers are keeping the cap on growth for pasture values. Low interest rates are also a factor driving higher values. Supply and demand conditions in corn, soybean, and wheat markets hint at higher prices for the foreseeable future relative to recent years. This should mean cropland values will remain firm. Declining cattle numbers in the next year or two should lend support to cattle prices too. If so, expect pasture values to perk up a bit as well. Weighing on the market, though, is how the Federal Reserve will manage interest rates given the recent spurts in inflation rates. The latest speculation suggests no changes to interest rates until 2023. If the central bank’s policy changes, it will affect Nebraska land markets.