Upper Midwest Land Values "Retreat from Historic Highs"

Last month, in its third-quarter 2016 Agricultural Credit Conditions Survey, the Federal Reserve Bank of Minneapolis indicated that, “Following a trend from recent quarterly surveys, land prices and cash rents retreated from historic highs.

The average value for nonirrigated cropland in the district fell by more than 3 percent from a year earlier, according to survey respondents. Irrigated land values fell 1 percent, while ranch- and pastureland values fell 5 percent, perhaps reflecting the more recent downturn in livestock prices.”

The Fed report also pointed out that, “Declining land prices were widespread across the region, with the exception of Montana where nonirrigated cropland prices increased 2 percent from a year earlier.

Values fell most in North Dakota, where lenders reported that nonirrigated cropland prices dropped 7 percent on average compared with a year earlier; rents for the same land in North Dakota fell 5 percent.

U.S. Federal Reserve Districts.

And a recent paper by University of Minnesota agricultural economist William F. Lazarus (“Minnesota Farm Real Estate Sales: 1990-2016“) indicated that, “This document consists largely of graphs and tables summarizing Minnesota farm real estate sales over the past two decades.”

The University of Minnesota update included the graph below, which contained “estimates of average farm real estate value drawn from three different sources of data [USDA, tax assessors, and the University of Minnesota].”

Graph from, “Minnesota Farm Real Estate Sales: 1990-2016,” by William F. Lazarus- January 2017.

The data from all three sources demonstrate a recent decline in land values from the generally upward trajectory over the past decade.

Meanwhile, Hope Kirwan of Wisconsin Public Radio reported last week that, “The value of Wisconsin farmland has remained steady in 2016, unlike the rest of the Midwest.

“Almost every state in the Corn Belt saw decreases to farmland values this year thanks to low commodity prices. Iowa’s land values fell for the third year in a row, something that hasn’t happened since the 1980s.

“But Dennis Badtke, chief appraiser from Badgerland Financial, said Wisconsin land prices are surprisingly strong.”

Graph from, “Land Values 2016 Summary.” USDA-NASS, August 2016. Wisconsin was one of the few states that saw an increase in land values.

Ms. Kirwan explained that, “Farm appraiser Arlin Brannstrom said the state’s diverse agriculture industry makes it more resilient to the impact of low prices.

“‘Wisconsin is a little bit different than most of the rest of the Corn Belt in terms of the dependence on row crops only,’ Brannstrom said. ‘We grow a lot of alfalfa crops, we have a lot of farms that are using livestock and are dependent on having enough acreage to dispose of their animal nutrients.’

Brannstrom said Wisconsin could see a decrease in land value in 2017 as rental rates for farmland decline and higher interest rates make loans less attractive.

Cash Rents in Minnesota

In a separate look at cash rental rates, University of Minnesota Extension Educator David Bau pointed out yesterday that, “Rent had been on a steady increasing trend of less than $10 per [acre] from 2000 through 2005 then started increasing more rapidly from 2006 through 2010 and then increased only slightly in 2011 due to lower prices in 2009 and 2010. With $6.00 plus corn and $12.00 plus soybean prices, rents took off in 2012 and 2013 before beginning to decline in 2014 as corn and soybean prices moved lower.”

Yesterday’s update indicated that, “Many factors effect rental rates like property taxes, input costs, yields, prices and gross income, but there does seem to be a relatively close tie to corn and soybean prices and rental rates.”