Duane A. Lienemann, UNL Extension Educator,
Webster County March 23, 2012 Edition
Spring is officially here. It seems like it has been here for awhile already. Spring brings many things including the new UNL Land Value and Rental Rates information. It is out and the survey confirms what most people close to agriculture already knew. Agricultural land values across the state have shot upward in recent months, which are not unexpected news to people in this area, if they have been watching the land auctions in the area this past fall and the beginning of this year.
With the land prices in Nebraska and across the Midwest skyrocketing and volatility in the commodity markets, there are a number of questions concerning farmland values and rental rates. With the rising age of farmers across our area there is also talk of transitioning of farm land and the need for new and beginning farmers to continue the traditions of family farm in our state. There are several programs being offered in Nebraska on “Beginning Farmers” issues. Terri Post (FSA Director for Webster County) and I decided it may be a good idea to join forces and conduct a workshop and address these issues with farmers, landowners and anyone interested in these important issues. Terri had been working with a coalition and will present information on Veteran Farmers and Beginning Farmer programs and how they apply to our area landowners.
Land Value, Rental Rate, & Beginning Farmers Workshop April 4: The topics of land value, rental rates and beginning farmer programs will be addressed in a workshop that is scheduled for Wednesday, April 4th at the Blue Hill Community Center starting at 1:30 pm. There will be a variety of topics discussed at the workshop including: beginning farmer programs, land values, cash rental rates, and integrity in rental agreements as well as discussion on the importance for the land owner and the tenant to have a good relationship and an agreement that is fair to both parties. There will be an overview of economics involved in the increase in land values and prices paid for land. We will also explore what events will push against continued increase in land value and rental rates and those things that will push an increase. The new UNL Land Value and Rental Rates will be provided to attendees along with explanation on how to use the document.
According to Dr. Bruce Johnson, who conducted the survey, preliminary results show the state's all-land average value as of Feb. 1 to be at $2,410 per acre, 31% above the year-earlier level. The annual gain is a new record in both dollar amount and percentage. Cropland especially showed significant value gains in every region of the state, with increases of 35% or more noted in several areas. Johnson indicates what a lot of us figured that a booming cash-grain economy in 2011 translated into spirited bidding for cropland and at the same time that demand was robust, the amount of land for sale in any given local area was generally minimal. In regards to transition of farm ground to new owners, the land-transfer market has been so thin that it's difficult to get a good reading on it. The survey also concluded that grazing land classes showed more modest value gains for the year, but overall for the state still showed a 19% increase for non-tillable grazing land. The tillable grazing land class, which is land considered to be potentially converted to cropland, recorded significantly higher values and larger higher percentage value gains in those areas where there are no moratoriums precluding further irrigation expansion. Reflecting the great resource diversity across the state, the per-acre values of land vary significantly. It was interesting to me that dryland cropland values show an even greater spread of more than seven-fold from west to east.
I don’t think it should surprise people that the UNL survey also reported higher cash rental rates for 2012 for all land classes, but the percentage advances of cash rents over the previous year were considerably below the land value advances. For cropland, cash rent increases usually fell in the 10% to 20% range. Dr. Johnson said it's reasonable to ask whether the gains of last year are sustainable. He said that if one assumes that farm incomes will remain at 2011 earnings levels or higher, then one may answer with a guarded yes. However, more likely is an immediate future that is economically volatile for production agriculture, triggered by weather patterns, the strength of the dollar, interest rates, international financial fallouts, and political unrest both here and abroad. He thinks that there is no question that some retreat of these value advances could easily happen in the next few years. He calls it a "reality reset." I think we all kind of figured that this land value bubble would either burst or at least hold steady eventually. The market can only bear so much and the prospects for lower crop prices lay heavily on this possibility. You can find the survey at: http://agecon.unl.edu/cornhuskereconomics
Beginning Farmers Program: Nebraska continues to lead the nation with efforts to provide an incentive for owners of agricultural assets to rent those agricultural assets to beginning farmers and ranchers. The Nebraska Beginning Farmers Tax Credit program provides owners of Nebraska agricultural assets such as land, livestock, machinery, grain storage, livestock facilities or irrigation equipment a state income tax credit incentive to rent to a beginning farmer/rancher, rather than someone that is more established. Owners of Nebraska agricultural assets can earn a ten percent state income tax credit for providing a beginner a three-year cash lease, or a fifteen percent state income tax credit for providing a beginner a three-year share lease. Owners can be either individuals or business entities such as trusts, partnerships, corporations or limited liability companies (LLC). In order for owners of Nebraska agricultural assets to benefit from the Beginning Farmer Tax Credit program, they must of course, be Nebraska residents. More information on this program can be found at: http://www.agr.state.ne.us/beg_farmer/index.html
or http://www.nebraskabeginningfarmer.org/ Enjoy this weather!!
The preceding information comes from the research and personal observations of the writer which may or may not reflect the views of UNL or UNL Extension. For more further information on these or other topics contact D. A. Lienemann, UNL Extension Educator for Webster County in Red Cloud, (402) 746-3417 or email to: dlienemann2@unl.edu or go to the !website at: http://www.webster.unl.edu
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