Agriculture land value in Nebraska increased 3% from February 2019 to February 2020 because of economic forces affecting farmland, according to an annual farm real estate report from the University of Nebraska’s Institute of Agriculture and Natural Resources.
Most of the state saw rates of increase averaging 3% to 5%. Other parts of the state reported increases between 1% and 2%, while southwest Nebraska saw a 1% decrease in ag land values. Overall, the statewide average agricultural land value increased by about $80 to $2,725 per acre, up from $2,645 in 2019.
Jim Jansen, the lead author of the report and an agricultural economist for University of Nebraska, said one reason for the increase was more interest in a tax-deferment strategy that allows an investor to defer tax payment on a property as long as a similar property is purchased using proceeds from the sale of the first property.
John Hansen, president of the Nebraska Farmers Union, said he assumed the land value rate would be down or flat. Hansen suspects there is a small number of sales driving land values. The report was conducted prior to the worldwide COVID-19 outbreak, which disrupted agricultural supply chains and resulted in a global economic downturn.
But, even before the COVID-19 outbreak, Nebraska farmers were struggling, he said.
“I look at this report, and it just doesn’t seem consistent with what else I know and what else I see,” he said. “Our phones continue to ring from our members.”
The Nebraska Rural Hotline, created in 1984 in response to financial stress facing Nebraska farm families, received a record number of calls from farmers and ranchers in January. Hansen said most are concerned about low commodity prices and rising property taxes.
“People had their hopes up that the Legislature would get something done about property taxes,” he said. “Now it’s looking like one more year of getting your hopes up and one more year of not getting anything done.”
The Nebraska Legislature is in session through Aug. 13, but as of Aug. 4 had not advanced property tax relief legislation.
Nebraska property taxes continue to rise, according to federal statistics. According to the U.S. Department of Agriculture, 43,000 Nebraska farmers paid $686.5 million in property taxes in 2017, a 43% increase from the previous census in 2012, and a 206% increase from 1997.
Jansen, the lead author, described the virus’s potential effect on land value as “not good.”
“If things continue to remain stressed, I would anticipate that we may see a possible decline, but to what extent I don’t know exactly,” Jansen said in a phone interview. “It’s unknown where real estate markets may be going in 2021.”
Nebraska farmers and landowners are well-acquainted with tough losses. Between 2014 and 2019, there was a 20% decrease in land values, according to the report. Last year’s value decrease also coincided with a drop in crop exports because of trade disruptions with China and Mexico, as well as historic flooding that damaged crops and killed livestock. The Nebraska Department of Agriculture reported a cattle and crop loss of $840 million in 2019 because of flooding.
Similarly, the Nebraska Farm Bureau estimated in June a revenue loss in the billions for the state’s agricultural economy due to the pandemic. The federal CARES Act provided $9.5 billion to farmers across the country to offset a portion of losses, according to the U.S. Department of Agriculture. The USDA also directed $14 billion as well.
“The one thing that I think has sort of helped keep ag from really, really being up against the financial blades has been the amount of federal dollars that have poured into agriculture the last three years,” Hansen said. “When you’re short of money, anything that you can do to try and reduce the size of the loss is good.”
The federal aid helped stabilize the already struggling agriculture industry.
“We continue to have challenges in trade with other countries because of the disruptions,” Jansen said. “We look at the ag value as a way to move product to destinations that have a demand for it and that’s a challenge that we’re trying to address right now.”
While the future appears grim, Jansen said markets seem to be momentarily stable due to lower interest rates. Since the report began in 1978, there have been fluctuations and any gradual changes are normal, Jansen said. The last increase in land values was in 2014 when the state peaked at $3,315 per acre.
Many Nebraska farmers remain dependent on federal payments and hopeful for a dramatic rise in commodity prices, Hansen said.
“When agriculture does well, we’re not only paying more taxes, but we have so many jobs and so many industries that are tied to agriculture. When we have disposable income, we help drive economic activity,” Hansen said. “After seven or eight years of prolonged low prices, agriculture really needs a turnaround here.”
The report also looked at who sold farmland in Nebraska in 2019. According to the report, this is the breakdown of farm real estate sales by seller:
- Active farmer, 18%
- Quitting farmer, 18%
- Estate, 39%
- Local non-farmer, 13%
- Non-local Nebraska resident, 7%
- Out-of-state resident, 5%
The full report can be found on the University of Nebraska Agricultural Economics website at https://agecon.unl.edu/2020-nebraska-farm-real-estate-report.