Nebraska Agriculture Land Values Rise

Nebraska Survey Finds Ag Land Values Hit Historic Levels; Economy Spurred Use of Land as Hedge

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A new University of Nebraska-Lincoln survey finds Nebraska ag land values hit historic levels. (DTN file photo)

LINCOLN, Neb. (DTN) -- Nebraska ag land values increased by an average of 16% compared to 2021, according to a statewide survey by the University of Nebraska-Lincoln.

Agriculture land hit an average of $3,360 per acre, according to the 2022 farm real estate market survey, which is the highest recorded value during the 43-year history of the survey.

The 16% spike is the largest increase in the market value of agricultural land in the state since 2014.

According to the annual survey of land industry professionals including appraisers, farm and ranch managers and agriculture bankers, higher commodity prices and interest rates near historic lows have contributed to the rising ag land market.

A report on the survey results said policies put forward in response to the economic effects of COVID-19 led to the ag sector receiving federal disaster assistance and an extended period of lower interest rates.

"The tapering back of disaster assistance was offset by higher crop and livestock income across Nebraska in 2021," the report said.

"The outlook for 2022 also appears favorable as commodity prices continue to rise, but the impact of higher input costs and intensifying drought across the state are causes for concern."

The report said higher income and low interest rates led to the "robust real estate sales markets."

Survey participants said farmers and others purchasing land looked to ag land as an asset to hedge against inflation and economic uncertainty.

Jim Jansen, an agricultural economist with Nebraska Extension and co-author of the survey and report, said ag land was hot despite rising costs.

"Many operations improved their financial positions in the last year, despite rising machinery costs and input expenses," he said in a news release.

Jansen said although the outlook for 2022 appears favorable with commodity prices rising, rising input expenses and drought across Nebraska are reasons for concern.

The report found estimated values of center pivot-irrigated cropland rose by about 17% in Nebraska. Dryland cropland values rose between 15% and 19%. Grazing land and hay land market values range from about 10% to 13% higher compared to 2021.

The UNL survey also showed higher cash rental rates for dryland and irrigated cropland, averaging about 10% to 15% higher than in 2021. Survey respondents said higher crop prices were the major factor contributing to the increase in rental rates.

In addition, grazing land and cow-calf pair rental rates trended steady to higher, according to the survey, with average statewide rates increasing about 6% to 8% over 2021.

The survey found a renewed use of 1031 exchanges, as proposals to change capital gains taxes led to their expanded usage.

A 1031 exchange in internal revenue law allows taxpayers to avoid paying capital gains taxes when they sell an investment property, and then reinvest the proceeds from the sale in a property or properties of like kind and equal or greater value.

"Uncertainty posed by investment taxation and inflation bolstered the use of 1031 exchanges when moving capital between assets," the report said.

"Investors and operators acquired land as a hedge against changes to policy and economic uncertainty. Overseas conflict leading to input shortages and higher expenses remains a challenge for navigating 2022. Favorable financial positions, lending terms, and stability of land as an investment, created a competitive real estate marketing across Nebraska."

The annual survey is conducted by the Center for Agricultural Profitability, based in the Nebraska Department of Agricultural Economics.

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley