NE Ag Real Estate Values Up as Nation Declines

The U.S. Department of Agriculture says farm real estate value in Nebraska is up, extending a trend that began in 1993. Farm real estate value on Jan. 1 averaged $1,340 per acre, a record high. That's up $10 per acre from last year's level. That's according to the USDA's National Agricultural Statistics Service. Cropland value increased 6 percent from last year to $2,180 per acre. Dryland acreage averaged $1,850 per acre and irrigated cropland averaged $2,700 per acre. Pastureland, at $450 per acre, declined 6 percent from a year ago. Cash rents paid to landlords in 2009 for cropland increased from last year and were also a new record high. Irrigated cropland rent averaged $164 per acre, an increase of $6. Dryland rent averaged $100 per acre, up $3 from 2008.

Despite Nebraska's agricultural real estate gains, farmland prices across the U.S., which advanced for 21 years, couldn’t escape the worst plunge in real estate since the Great Depression.

The value of all land and buildings on farms averaged $2,100 an acre at the start of 2009, down 3.2 percent from a year earlier, the first decline since 1987, the U.S. Department of Agriculture said yesterday in an annual report. Prices in Corn Belt States including Iowa and Illinois fell 2.2 percent to $3,620 an acre. In Montana, they plunged 22 percent to $700.

No U.S. real estate avoided the damage caused by subprime- mortgage defaults that sent home prices in cities down 19 percent last year and led to a 35 percent plunge in commercial values from an October 2007 peak. Farmland is starting to pick up and may return 10 percent a year as the recession eases, said Jeff Conrad at Hancock Agricultural Investment Group in Boston. “The market is taking a breather, but demand fundamentals are still in place,” said Conrad, a managing director who helps oversee $1.1 billion of farmland that returned 4.4 percent in the year ended June 30. “Population, more Western-style diets and land availability all point toward more growth.”

Corn, wheat and soybeans dropped from records last year as the first global recession since World War II worsened and farmers increased world grain production by 5.5 percent, according to International Grains Council figures. The USDA expects net-farm income to drop 20 percent this year to about $71.2 billion from last year’s record.

Credit Crisis Wheat fell 31 percent last year on the Chicago Board of Trade while soybeans declined 19 percent and corn 11 percent.

“Livestock and crop commodity prices have declined from a year earlier, thus producers and investors are less optimistic than a year ago,” the USDA said in yesterday’s report. “A decrease in the demand for recreational land has also contributed to the overall decrease in land values.”

Northeast states were the most expensive of the 10 regions in the lower 48 states tracked by the USDA, with an average price of $4,830 an acre. The least-expensive area was the Mountain states, at $922 an acre. Even after the declines, the value of U.S. farmland, excluding Alaska and Hawaii, was the second-highest on record, above the $2,010 in 2007.

Investment in real estate was hurt by the freeze in credit markets that caused the world’s biggest financial companies to report more than $1.5 trillion in writedowns and credit losses, and worsened the global recession.

Foreclosure filings reached a record 1.5 million, or one in 84 U.S. homes, in the first half of the year, according to RealtyTrac Inc., an Irvine, California-based seller of default data. Annual Returns

Farmland prices are rebounding this year, Conrad said. Combined returns from agriculture and property appreciation may reach 10 percent annually over the next decade amid shrinking acreage and rising food demand, he said.

U.S. agricultural acreage is the smallest since the 1920s, according to the USDA. The United Nations says world food demand will double by 2050.

Food importers such as South Korea are purchasing land abroad to secure crop supplies, seeking protection against future shortages. Worldwide food prices surged to a record last year, bringing the number of hungry people to about 1 billion, according to the UN.

Rural property values fell less than city prices because farmers’ debt loads are the lowest in least 50 years, said Jason Henderson, a vice president with the Federal Reserve Bank of Kansas City.

Debt Ratios The USDA forecasts the ratio of debt to assets for planters will be 9.1 percent this year, less than half the levels seen at the peak of the 1980s farm crisis.

Gains in property values may be limited in the next two years by concerns that a slow economy will restrain crop prices and curb growth in Asia, Hancock’s Conrad said. Total returns in his group’s investments averaged more than 12 percent since 1991, he said.

Farmland remains attractive, even after the decline last year, said Harold Griffiths, who bought 348 acres (141 hectares) of Iowa corn and soybean land this year.

“There isn’t going to be any more of it, and there’s only going to be more people,” said Griffiths, the owner of the 600- worker Wrico Stamping Co. in Plymouth, Minnesota. “It seems like a pretty sure bet.”