Land values are often a big topic of discussion at producer meetings. This post is the first in a series that evaluates recent land values. Additional information will be posted next week.
In recent years, factors such as increasing commodity prices and farm incomes, combined with lifetime low long-term interest rates, have helped fuel higher land values. However, given natural economic and market cycles, these factors are reversing course, as crop prices and farm incomes moderate, and interest rates begin to rise. Not surprisingly, land values also face a correction. However, most agricultural producers across the AgriBank District* and the nation are in a strong financial position that will help keep the correction from becoming a crisis.
Cropland Average Value per Acre Source: USDA 2014 Survey
The average value of cropland across the 15-state AgriBank District rose by 8.3 percent to $4,547 per acre, according to the U.S. Department of Agriculture 2014 Survey. The District growth rate was slightly higher than the U.S. average of 7.6 percent. However, the 2014 growth rate represents a notable slowdown from 12.9 percent in 2013 and 14.1 percent in 2012. Lower actual and expected corn and soybean prices started to weigh on valuations in the summer of 2014, when the survey was conducted.
Cropland 2014 Percent Change from 2013 Values Source: www.federalreserve.com
All states in the 15-state AgriBank District displayed positive growth in cropland values in 2014, with South Dakota having the largest percentage growth. The previous year’s No. 1 state for cropland value growth, North Dakota, finished second this year, followed by Minnesota, Iowa and Michigan.
Pastureland Average Value per Acre Source: USDA 2014 Survey
In 2014, the average value of pastureland in the AgriBank District rose $103 per acre, or 5.1 percent, which was a slower growth rate than the U.S. average of 11.1 percent. However, the 2014 growth rate was still notably higher than the previous three-year average of 4.3 percent. This may be indicative of strong livestock profit margins starting to factor into the value of pastureland.
Pastureland 2014 Percent Change from 2013 Source: USDA 2014 Survey
When looking at the growth in pastureland value by state, the Plains states of Nebraska, North Dakota and South Dakota dominate over others. This is indicative of very strong feeder cattle prices and their impact on cow-calf margins over the past year. The dairy-dominant state of Wisconsin comes in at a distant 4th place. The 2014 ranking differs slightly from 2013, when North Dakota and South Dakota came in at No. 1 and No. 2, respectively, with Nebraska placing a distant 9th.
*Information in this post was provided by AgriBank. AgriBank is FCS Financial’s funding source. It is one of the largest banks within the national Farm Credit System, with more than $80 billion in total assets. Under the Farm Credit System’s cooperative structure, AgriBank is owned by 17 affiliated Farm Credit Associations. The AgriBank District covers America’s Midwest, a 15-state area from Wyoming to Ohio and Minnesota to Arkansas. More than half of the nation’s cropland is located within the AgriBank District, providing the Bank and its Association owners with exceptional expertise in production agriculture. For more information, visit www.AgriBank.com.
In recent years, factors such as increasing commodity prices and farm incomes, combined with lifetime low long-term interest rates, have helped fuel higher land values. However, given natural economic and market cycles, these factors are reversing course, as crop prices and farm incomes moderate, and interest rates begin to rise. Not surprisingly, land values also face a correction. However, most agricultural producers across the AgriBank District* and the nation are in a strong financial position that will help keep the correction from becoming a crisis.
USDA Land Value Surveys: Cropland Growth Slows, Pastureland Strengthens
Cropland Average Value per Acre Source: USDA 2014 SurveyThe average value of cropland across the 15-state AgriBank District rose by 8.3 percent to $4,547 per acre, according to the U.S. Department of Agriculture 2014 Survey. The District growth rate was slightly higher than the U.S. average of 7.6 percent. However, the 2014 growth rate represents a notable slowdown from 12.9 percent in 2013 and 14.1 percent in 2012. Lower actual and expected corn and soybean prices started to weigh on valuations in the summer of 2014, when the survey was conducted.
Cropland 2014 Percent Change from 2013 Values Source: www.federalreserve.comAll states in the 15-state AgriBank District displayed positive growth in cropland values in 2014, with South Dakota having the largest percentage growth. The previous year’s No. 1 state for cropland value growth, North Dakota, finished second this year, followed by Minnesota, Iowa and Michigan.
Pastureland Average Value per Acre Source: USDA 2014 SurveyIn 2014, the average value of pastureland in the AgriBank District rose $103 per acre, or 5.1 percent, which was a slower growth rate than the U.S. average of 11.1 percent. However, the 2014 growth rate was still notably higher than the previous three-year average of 4.3 percent. This may be indicative of strong livestock profit margins starting to factor into the value of pastureland.
Pastureland 2014 Percent Change from 2013 Source: USDA 2014 SurveyWhen looking at the growth in pastureland value by state, the Plains states of Nebraska, North Dakota and South Dakota dominate over others. This is indicative of very strong feeder cattle prices and their impact on cow-calf margins over the past year. The dairy-dominant state of Wisconsin comes in at a distant 4th place. The 2014 ranking differs slightly from 2013, when North Dakota and South Dakota came in at No. 1 and No. 2, respectively, with Nebraska placing a distant 9th.
*Information in this post was provided by AgriBank. AgriBank is FCS Financial’s funding source. It is one of the largest banks within the national Farm Credit System, with more than $80 billion in total assets. Under the Farm Credit System’s cooperative structure, AgriBank is owned by 17 affiliated Farm Credit Associations. The AgriBank District covers America’s Midwest, a 15-state area from Wyoming to Ohio and Minnesota to Arkansas. More than half of the nation’s cropland is located within the AgriBank District, providing the Bank and its Association owners with exceptional expertise in production agriculture. For more information, visit www.AgriBank.com.
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