Date of this Version
During a period of record-level farm incomes, Nebraska farmland values rose an average of 11.9 % for the year ending February 1, 2005, the largest annual percentage increase of the past 16 years. The increase followed the sizable advances of the previous year, in contrast to several recent years of fairly stable to moderate value increases. While increases were reported by UNL survey respondents across the entire state, there was considerable variability in magnitude of percentage gains. Largest gains were recorded in southeast and eastern Nebraska, with changes of 18.8 % and 13.5 % respectively. Much smaller annual gains were recorded in northwest and southwest Nebraska, particularly for cropland classes–both areas where multi-year drought impacts have continued. Being an income-producing asset, it is reasonable to expect some correlation of land value changes with farm income trends and conditions. In fact, when plotted over extended multi-year periods, it is apparent that a gradual improvement of farm income levels over time have, in fact, created a fl oor for the land value movements that have occurred. While farm income impacts land values in a number of ways, UNL survey reporters placed, for the fi rst time ever, non-farmer investor interest and “1031” tax exchange opportunities as the two most signifi cant factors currently contributing to higher land values. Clearly, the local markets for agricultural land across the state have gradually taken on a much stronger presence of non-farmer buyers and interests in recent years. And until such time that economic conditions improve for alternative investments and/or capital gains tax provisions are altered, it is likely that these demand elements will continue. Correlated with the above, this year’s survey results regarding actual farmland transfers which occurred in Nebraska over the previous 12 months found that active farmer/ranchers represented less than three-fi fths (59 %) of all the buyers. This was the lowest annual percentage by this buyer group in more than 20 years of tracking these market patterns. As land values were rising sharply for most types of land across the state, cash rent levels for 2005 were generally advancing only moderately over previous-year levels. Lower crop prices and rising non-land input costs at time of negotiating 2005 cash rents kept the bidding process more cautious for 2005, in spite of high income levels in 2004. For the first time in the farm real estate series, extension educators in a number of Nebraska counties conducted supplemental rental surveys which provided more comprehensive and localized measures of rental market conditions. While differences can be observed in these countylevel findings from the regional data series, the patterns were generally consistent with the ranges for the region.