Nebraska agricultural land values are approaching historic highs, but longtime landowners aren't getting rich on their investment.

When adjusted for inflation, today's ag land values are about the same as 25 years ago, University of Nebraska research shows.

A land value upswing during the 1970s spurred Agricultural Economist Bruce Johnson to launch the annual Nebraska Farm Real Estate Market Survey in 1978. Over the past 20 years, this survey has captured Nebraska agriculture's economic trends.

"The agricultural land market is kind of like a barometer of the agricultural economy, reflecting its strengths and weaknesses," explained Johnson, who has conducted the Institute of Agriculture and Natural Resources survey since it started.

Taken annually on Feb. 1, the survey polls 250 to 300 farm appraisers, real estate brokers and professional farm managers. It provides estimates of current market values, cash rental rates, net percentage rates of return and other market information.

In 1978 Nebraska farmers had just come through five of "the golden years of ag," Johnson said. Annual land value increases sometimes exceeded 20 percent. A severe economic downturn in the mid-1980s followed that prosperity.

"If you bought land 25 years ago, the purchasing power of that land when you bought it is basically the same as it is today, even though you went through a huge run-up in value and a big bust," Johnson said.

In 1973 Nebraskans farmed 47.8 million acres, and USDA reported the average ag land value at $193 an acre. By 1998 there were 47.1 million ag acres and the average hit $710 an acre, according to NU"s annual survey. The Nebraska survey showed average land values climbed to $749 an acre in 1981 before bottoming out six years later at $306 an acre. Values have increased annually since 1987. Demand and price for lands vary depending on their use and technology.

Center pivot irrigated cropland exemplifies demand-driven prices. Labor savings, better water application efficiency and the ability to apply chemicals through sprinklers make center pivot land more attractive to producers than gravity irrigated land, Johnson said.

As a result, pivot irrigated cropland values increased an average of 8.5 percent annually over the past 10 years while gravity irrigated land climbed 7 percent. Center pivot cropland, excluding pivots themselves, averaged $1,471 an acre in 1998 compared with $661 an acre in 1988. Gravity irrigated farmland averaged $1,847 an acre in 1998, up from $947 an acre in 1978.

Ag land buying trends have changed a bit over the past 20 years, Johnson said.

Traditionally, farmers and ranchers have bought 80 to 90 percent of ag land, but they purchased only 70 percent of land sold in 1997, Johnson said. Non-local residents and out-of-state investors bought much of the rest.

Land purchasers vary regionally. In 1997 out-of-state buyers bought 40 percent of land sold in Nebraska's northern district, while active producers bought 50 percent and others purchased 10 percent. In the southern district, active farmers bought 88 percent of ag land sold.

It appears that out-of-state buyers more frequently purchase grazing land than cropland. Grazing land sales usually involve entire ranches, which are more valuable sold as complete units, Johnson said.

Cropland usually sells in parcels to be added to existing operations. One interesting trend, Johnson noted, is the move from selling entire farms to selling land parcels. Most of the recent cropland sales across Nebraska were 80-to 160-acre parcels.

"Conventional wisdom is that we buy, sell and trade whole farms, but we don't do that any more," Johnson said. "It's a parcel market."

Strong agricultural incomes for most crop producers in recent years combined with favorable financing to increase ag land demand, Johnson said. Grazing lands also gained significantly, despite a more volatile cattle market.

The Nebraska Department of Revenue helps fund the survey.

-Dan Holder

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