Nebraska Agland Market Highlights (4/17/2013)

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2013 NEBRASKA AGLAND
MARKET HIGHLIGHTS
by
Bruce Johnson
UNL Department of
Agricultural Economics
[email protected]
The Market in a Nutshell
“A $7 Corn Land Market
With $5 Corn on the Horizon”
Recent History:
Land Boom Conditions
Nebraska at the “Epicenter”
of the U.S. Land Boom
Agricultural Land Markets up Across
the Country, but Nebraska And Neighboring
States Leading the Nation
USDA Farmland Value Percentage Changes
6/1/2011 – 6/1/2012
Rank / State
0
5
10
15
20
25
1st Nebraska
33.5
2nd North Dakota
26.58
3rd South Dakota
23.9
4th Iowa
22.8
5th Minnesota
20.9
6th Kansas
19.2
7th Illinois
17.5
8th Indiana
17
9th Missouri
13.7
10th Ohio
13.6
48 States
30
10.9
Source: Economic Research Service, U.S. Department of Agriculture
35
40
The Current Market
Nebraska Land Values Climb 25% in Past 12 Months
2013 Values and Recent Trends by Land Class in Nebraskaa
Land Class
2013 Average
Value
(Preliminary)
Dollars/Acre
1-Year
Change
3-year
Change
% Change in Value
Dryland Cropland:
No Irrigation Potential
3010
25
97
Irrigation Potential
5,270
21
102
1230
22
84
695
19
64
Gravity
6835
27
109
Center Pivotb
7590
30
115
3040
25
102
Grassland:
Tillable
Non-tillable
Irrigated Cropland:
All Land:
a Source:
b Value
Annual February 1st UNL Nebraska Farm Real Estate Market Surveys.
of pivot not included in per acre value.
Sharp Upward Advances Across the State
2013 Nebraska Farmland Values and Recent Trends
by Sub-State Region
Agricultural
Statistics
District
2013 All-Land
Average Value
(Preliminary)
Dollars/Acre
Northwest
1-year
Change
3-year
Change
Percent Change
715
13
54
North
1055
20
69
Northeast
6165
24
113
Central
3750
27
103
East
7185
18
93
Southwest
1750
31
89
South
4460
33
118
Southeast
5400
26
121
Entire State
3040
25
102
Source: Annual UNL Nebraska Farm Real Estate Market Surveys.
Nebraska Nominal
Agricultural Land Values
Longer-Run
History:
3,500
3,000

Upward but not
steady climb for
several decades
“Boom to Bust”
event just 30
years ago
2,500
Price ($/acre)

2,000
1,500
1,000
500

Major climb in
nominal values
in recent years
0
Year
2013 Nebraska Values Adjusted For
Inflation At New Heights!
USDA Real Average Land Values for NE: 1950-2013P
1,800
1,600
Price ($/Acre)
1,400
1,200
1,000
800
600
400
200
0
Time
Key Land Boom Drivers
#1 Record-Shattering Farm Income Levels
Net Farm Income (Billion $)
Annual Net Farm Income In Nebraska:
2001- 2012
8
7
6
5
Series1
4
3
2
1
0
Source:ERS
Year
Nebraska Corn Price & Net Farm Income
$8.00
$8.00
$7.00
$7.00
$6.00
$6.00
Nebraska Net Farm Income
Nebraska Average Corn Price
$5.00
$4.00
$4.00
$3.00
$3.00
$2.00
$2.00
$1.00
$1.00
$0.00
$0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012P
$ billion
$ per bushel
$5.00
Key Land Boom Drivers
#2 Historically Low Interest Rates
Farm Income Levels
Capitalization Rates
Estimated Net Rate of Return on
Investment: Selected Years
0
1
Percent
3
2
4
5
6
2012:
Irrigated Land
Dryland Cropland
Grazing Land
3.9%
3.5%
2.4%
2007:
Irrigated Land
Dryland Cropland
Grazing Land
5.4%
4.1%
3.2%
2002:
Irrigated Land
Dryland Cropland
Grazing Land
Source: UNL Nebraska Farm Real Estate Market Developments Survey Series
5.7%
4.7%
3.8%
Value–to–Cash Rent Ratio
Climbing into New Territory!
Value-to-Cash Rent Multiple For Eastern Nebraska
Center Pivot Cropland, 1981-2012P
What’s On The Horizon?
Prevailing Drought
Cutting Production?
Increasing Input Costs?
$5/Bu. Corn?
Cash Rent Market Trends More Moderate
Question:
Are Tenants Taking on
Too-High of Rents?
Answer:
MAYBE!
Depends on 2013 Commodity
Prices and Yields
If Paid $350/AC for Irrigated and $220/AC Dryland Cropland
If Paid $350/AC For Irrigated
and $220/AC Dryland Cropland
Summing Up:
The Boom Years May Be Over
Real Estate Meltdown Unlikely
--But Some Readjustment
on the Horizon
Your Thoughts:
Corn Price In:
2013?
2014?
2015-2020?
Weather Patterns In:
2013?
2014?
2015-2020?
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