Date of this Version
Agricultural land values in Nebraska rose an average of 2.8 percent during the year ending February I, I995. While this represented the eighth straight year of value advances, it was the smallest annual percentage change of that period. Relative stability in agricultural real estate values during I994 was prevalent across the state with only, slight percentage changes in either direction recorded across the various types of land and location.
Despite a poor livestock economy, non tillable grazing land had the largest percentage gain during the I2-month period (4.9 percent). In contrast, gravity irrigated cropland rose only I percent for the state as a whole.
According to the I995 Nebraska Farm Real Estate Market Survey, the I995 average value is approaching 80 percent of peak all-land value of the land boom period I5 years ago. However, the degree of recovery is highly variable across the state and by land type.
During I994 active farmers purchased three-fourths of the tracts on the market, usually as unimproved parcels to be added to existing units. Local markets prevail with the majority of buyers purchasing land within five miles of where they reside.
Cash rental rates for agricultural land in I995 generally continued at I994 levels which, in many cases, represented historic highs. When compared against the current land asset values, the gross rent to value ratios generally range from 6.5 to 9.0 percent.
Annual net returns to agricultural cropland are estimated by survey reporters to be about 5 to 6 percent of current value. Net returns on grazing land are somewhat lower averaging 4 to 5 percent annually. At these rates of return, heavy use of debt leveraging is inappropriate and certainly explains why a considerable amount of recent market transactions represent cash sales.
Reporters in the 1995 survey were asked to list what they believed were key positive factors and key negative factors currently impacting the farm real estate market. Most frequently noted positive elements were excellent crop yields in 1994 and the long-term continuing buyer interest in farm size expansion. On the negati.ve side, rising interest rates and low commodity prices at the beginning of the year were most frequently noted as dampening forces.
As for expectations in I995, the majority of survey reporters expected the level of market activity to remain similar to year earlier levels with stable to slightly higher agricultural land values.