Nebraska Farm Real Estate Market Developments 2005-2006

Nebraska’s agricultural land values rose an average of 9.6 percent during the year ending February 1, 2006. This brought the state’s average all-land value to over $1,000 per acre and the total worth of agricultural real estate to more than$45 billion. In the wake of a series of generally favorable income years for most of the state’s agricultural sector, land values have advanced rather sharply over the past three years – particularly in the eastern third of the state. The three eastern districts have experienced value increases of 40 percent or more since February 2003. In contrast to these sharply higher values, some other areas of the state have experienced more moderate gains and even some value declines. This occurred in the South District during the year ending February1, 2006 where the all-land average value declined over four percent. The declines in that area were closely associated with the irrigation land classes. Likewise, gravity irrigated cropland in the Southwest district was down slightly for the year as expectations of future irrigation water availability remain uncertain in these areas. General market characteristics in 2005 were similar to those reported in recent years. Based on reporter information on 475 actual, representative sales, about half of all purchases were for cash with no debt financing, even though the average dollar value per transfer exceeded $300,000 in every district. About three of every five buyers was an active farmer/rancher. Nonfarm buyers reportedly had a significant presence in most local markets across the state; and their activity is seen as a contributing factor in the upward movement of land values. Despite large dollar jumps in petroleum-based farm inputs, cash rental rates for cropland in 2006 were not negotiated lower in most regions of Nebraska. In fact, some modest increases in 2006 cropland cash rental rates occurred in the eastern districts. This year, UNL reporters provided valuable insight into the dollar adjustments typically being made to average cash rental rates when the tenant is providing some of the irrigation system. The sharing of the irrigation system components is an increasing occurrence. Results of the 2006 UNL survey suggest that associated percentage net rates of return to agricultural land continue their gradual decline of several years duration. Current annual net rates of return are in the three to five percent range for much of the state’s agricultural land base

Cropland Leasing Decisions for 2008

With more than 40 percent of Nebraska’s agricultural land being leased, thousands of landowners and tenants face important lease decisions each year. Currently, the economic magnitude of these decisions is even greater, given the circumstances for 2008 crop prospects

Developing a Fair Lease Arrangement for Farmland Leasing Arrangements Workshops

Topics Covered: A.Cash Leasing B.Flexible Cash Leasing C.Crop share Leasing D.Other Leasing Aspect

Retail Sales Trends Across Nebraska Counties and Localities

Retailing patterns are changing everywhere. Consumer preferences and resources are ever-changing; while simultaneously, the retail sector is constantly evolving into new configurations. Often retail trade centers are pitted against one another in a “zero-sum game” so to speak with any relative gains in trade volume by one occurring at the expense of others. Nebraska is certainly no exception to these universal changes. In fact, the changes often seem compounded across its wide size continuum of towns and cities. This report represents an update to an earlier report, Retailing Patterns and Trends across Nebraska, 1970-1998. In it we are attempting to provide an accurate up-to-date assessment of geographic patterns and trends over time. Using taxable non-vehicle retail sales data maintained by the Nebraska Department of Revenue, we have developed some indicators of relative retail activity performance down to county and town/city level. Both cross-sectional and time-series performance evaluations are possible for localities. We have also provided county-level analysis by retail classification using the U.S. Census of Retailing conducted every five years. Hopefully, this analysis can provide businesses and community leaders a basis for: (1) understanding the general retailing trends underway; (2) conducting relevant comparative analysis with other communities; and (3) identifying possible strategies for contributing to retail trade viability in their respective areas

Has the Ethanol Industry Impacted Nebraska Land Values?

The growth of the United States ethanol industry has been quite extensive, especially in Nebraska, where production has grown from 523 million gallons per year in 2005, to 1,115 million gallons per year in 2008 (Nebraska Energy Office, 2009). Rural areas are at an advantage for attracting ethanol plants, as prospective plants want to locate as close as possible to its chief resource - corn. In exchange for locating near its feedstock, ethanol plants offer higher prices in the competition for corn, which in turn has impacted farm income. Surprisingly, little research has been done with regards to an ethanol plant’s impact on farmland values

Nebraska Farm Real Estate Market Developments 2007-2008

In this, the 30th year of the UNL Farm Real Estate Market Developments Survey and report series, some of the most dramatic changes ever in the market have occurred. During the year ending February 1st 2008, the average value of Nebraska farmland rose 23%, the largest annual increase in the series. Virtually every region of the state experienced strong cropland value increases. Cash rental rates experienced record advances as well, with 2008 levels for the cropland classes being 17% to 24% higher than 2007 levels. Clearly, the agricultural real estate market has responded to crop commodity prices which have shot upward to record levels, and with them economic returns to land that few would have thought possible just a few years ago. Domestic demand from the ethanol industry coupled with a growing world demand has tipped the supply/demand dynamic to a point where market participants are factoring in a whole new paradigm of income expectations into the land market decision framework. The rapid rise of Nebraska agricultural land values over the past four years (an average increase of 72%) raises concern that this may be a real estate bubble that is not sustainable and hence lead to subsequent devaluation. However, the income fundamentals underlying the recent increases appear sound. Active farmers have returned to dominate the buying side of the market in most regions of the state, accounting for nearly three-fourths (73%) of the Nebraska purchases in 2007. In contrast, active and quitting farmers represented only a third of the selling side of the market. One indicator of the current financial strength of the market is the fact that half of the reported sales during 2007 were cash purchases with no debt financing incurred. This was even more significant, considering that the average purchase price exceeded $400,000 per parcel in seven of the eight sub-state regions. Compared with recent years, both the reported and the calculated net percentage rates of return to the various agricultural land classes have risen. This is an indication that buyers are using some caution and factoring greater risk considerations into their maximum bid determinations. In other words, the new levels of economic returns to land are not being fully capitalized into the land values. Given the increased volatility of the entire agricultural economy, this is a positive sign that the land markets are responding responsibly. As for 2008 expectations, the vast majority of UNL survey reporters (86%) anticipated further increases in agricultural land values during the year. On average, they were expecting increases of 12% for the year. The majority of reporters (63%) expected the level of market activity—number of parcels being offered for sale—to be similar in 2008 to levels of recent years

The Impact of Ethanol Plants on Surrounding Farmland Values: A Case Study

The expansion of the corn ethanol industry after 2003 increased corn prices throughout the United States, and, in some cases, prices were shown to be higher with proximity to individual ethanol plants. This leads to the hypothesis that the value of farmland in close proximity to ethanol plants is higher than comparable farmland located farther away. This hypothesis was explored by examining the sale of 961 farmland parcels during 2004–2008, in the vicinity of two corn ethanol plants in northeastern Nebraska. Hedonic models including land characteristics as well as spatial and plant proximity measures failed to show support for the hypothesis.