Land Values have Cooled

Hettinger County Extension The hot farm land market showed significant cooling during 2013, according to Andrew Swenson,

Posted April 25, 2014

North Dakota State University Extension Service farm management specialist. His estimate is derived from the published results of a January 2014 county survey commissioned by the North Dakota Department of Trust Lands.

“Land values showed about an 8 percent increase from the previous survey, compared with a 42 percent increase during 2012,” Swenson says. “It is quite possible that land values peaked in the last few months of 2013, when the financial impact of lower crop prices became more evident, especially in the Red River Valley, where two major crops, corn and sugar beets, had negative returns, on average.”

Land values in the northern Red River Valley region showed a 4 percent decline (to $3,283) from January 2013 to January 2014 after a 56 percent increase the previous year. All other regions had positive year-to-year results, with the lowest being 3 percent (to $4,319) in the southern Red River Valley counties and (to $2,058) in the northeastern region.

“Unless crop prices have a significant rally, it is likely that next year’s survey will confirm that the historic 11-year run in land values, averaging an annual increase of 15 percent, is over,” Swenson says.

The reality of crop price declines was abrupt. In 2013, net farm income dropped more than 80 percent in the Red River Valley and approximately 50 percent in the rest of the state, according to results from those enrolled in the Farm Business Management Education program. “In addition, 2014 projected crop budgets were sobering,” Swenson says. “Producers and their bankers are more cautious about jumping on the land escalator.

However, if interest rates remain low and cash prices stabilize above $4 per bushel for corn, $11 for soybeans and $6.50 for wheat, it is possible that land values may have a soft landing.” The largest increase in cropland values (January 2013 to January 2014) was about 28 percent (to $1,278) in the southwestern region, nearly 15 percent (to $1,738) in the northcentral region and 13 percent (to $1,523) in the south-central region. Three regions, east-central (to $2,490), southeastern (to $3,183) and northwestern (to $950), had increases of 8 to 10 percent.

“The survey indicated that land rents, as typical, did not change as much in percentage as land values,” Swenson says. “On average, cropland rents increased about 4 percent (January 2013 to January 2014).”

Surprisingly, the largest increase was 8 percent (to $124.20) in the southern Red River Valley. The average rent increased about 7 percent (to $60.10) in the south-central and (to $38.50) southwestern regions. Rents increased 4 to 5 percent (to $49.90) in the north-central, (to $56.70) in the northeastern and (to $96.80) in the southeastern regions. Crop land rent only increased by 2 percent (to $66.90) in the eastcentral region and had slight declines (to $34.70) in the northwestern region and (to $89) the northern Red River Valley.

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