Burton Pflueger

Larry Janssen

English

Research Papers in Economics

E C O N O M I C S  
C O M M E N T A T O R 
 
South Dakota State University           No. 489           June 14, 2007 
 
SOUTH DAKOTA AGRICULTURAL LAND VALUES 
                      AND CASH RENTAL RATES, 2007
  
                       by    
              Burton Pflueger, 
            Extension Specialist/Professor, 
Economics  
Larry Janssen 
Professor, Economics 
                          
 
South Dakota’s agricultural land values increased 
14.4% this past year. The average value of 
agricultural land (as of February, 2007) varies from 
$285 per acre in the northwest region to $1946 per 
acre in the east central region.  These are key 
findings from the 2007 South Dakota Farm Real 
Estate Market Survey reports completed by 214 
agricultural lenders, Farm Service Agency officials, 
rural appraisers, assessors, realtors, professional 
farm managers, and Extension agricultural 
educators.  
 
This is the seventeenth annual SDSU survey 
designed to estimate agricultural land values and 
cash rental rates by type of land in different regions 
of the State.  Summaries of prior survey results 
were reported in earlier Economics Commentator 
issues.   
 
The information in this newsletter provides an overview 
of agricultural land values and cash rental rates across 
South Dakota.  We caution the reader to use this 
information as a general reference, and to rely on local 
sources for more specific details.  
 
Respondents provided county land value and cash rental 
rate information by agricultural land use.  Responses, 
grouped by region with average values for all classes of 
land, are provided in Figure 1.  Separate estimates of 
land value and cash rental rate information for 
nonirrigated cropland, irrigated land, hayland, rangeland, 
and tame pasture are provided in Figures 2-4. 
 
 
 
Average Land Value Summary 
As of February 2007, the average value of all-
agricultural land in South Dakota was $850 per-acre, a 
14.4% increase in value from one year earlier. This rate 
of increase is the same as reported from 2005 to 2006 
and is lower than the record high increase of 20.2% from 
2004 to 2005. 
 
The increase of $107 per-acre in the value of all 
agricultural land is the second highest annual dollar per-
acre increase during the past 17 years. Overall, 
agricultural land values in South Dakota have doubled 
Figure 1.  Average value of South Dakota 
agricultural land, February 1, 2007 and 2006, and 
percent change from one year ago. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regional and statewide average values of agricultural land are the 
weighted averages of dollar value per acre and percent change by 
proportion of acres of each non irrigated land use by region. 
 
      Top: Average per acre value—February 1, 2007 
 Middle: Average per acre value—February 1, 2006 
Bottom: Annual percent change in per acre land value 
 
Source: 2007 South Dakota Farm Real Estate Market Survey, SDSU. 
We wish to thank the individuals who participated in the 
2007 South Dakota Farm Real Estate Market Survey.  
Without their responses this report would not be 
possible.  Special thanks to: Tyler Ahrendt for data input 
and conducting the survey; Janet Wilson for maintaining 
the mailing list; and to Penny Stover for several varied 
survey tasks. since 2002 and tripled since 1996!  Agricultural land 
values increased at double digit rates in all regions of 
South Dakota with the strongest increase of 21.1% in the 
northeast and 18.4% in the east-central region. In all 
other regions, land values increased between 11.3% and 
12.8% 
 
The all-land average values are highest in the three 
eastern regions with per-acre values ranging from $1,946 
in the east-central region to $1,768 in the southeast 
region and $1,422 in the northeast region. The per-acre 
increase in all-land values from 2006 to 2007 varied 
from $303 per-acre in the east-central region to $185 per 
acre in the southeast region.  
 
Agricultural land values are highest in the east central 
region, followed by the southeast region.  Cropland and 
hayland are the dominant land uses in these regions, 
which contain the most productive land in South Dakota.  
The lowest average land values are found in the 
northwest and southwest regions. 
 
In each region, per acre values are highest for irrigated 
land, followed in descending order by nonirrigated 
cropland, hayland or tame pasture, and native rangeland 
(Figures 2 and 3).  Within each region, there is 
substantial variation in per acre land values by use and 
land productivity. 
 
Cropland values have been increasing at a much slower 
rate in the western and south-central regions compared 
to the more cropland intensive regions east of the 
Missouri River. For example, cropland values in the 
northwest and southwest region doubled from 1995 to 
 
Figure 2.  Average value of South Dakota cropland, 
irrigated land, and hayland, by region, February 
2007, dollars per acre. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
aIrrigated land values shown for the northwest and southwest regions 
are based on the average value reported for gravity irrigated land in 
both western areas. 
bIrrigated land values for the central and south-central regions are 
based on the average value reported in both regions. 
 
Source:  2007 South Dakota Farm Real Estate Market Survey, SDSU. 
2007 while cropland values more than tripled during the 
same period in all five regions east of the Missouri 
River. From 2006 to 2007, cropland values increased an 
average of $330 per-acre in the east-central region and 
$314 per acre in the northeast region, compared to $182 
per-acre in the southeast region. These three eastern 
regions contain 45% of South Dakota’s cropland. Corn 
and soybeans are the major crops in most counties. 
 
Figure 3.   Average value of South Dakota rangeland 
and tame pasture, by region, February 2007, dollars 
per acre. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source:  2076 South Dakota Farm Real Estate Market Survey, SDSU. 
 
South Dakota hay land values averaged $875 per-acre as 
of February 2007, a 15.4% increase from one year 
earlier. Very strong annual increases in hay land values 
(from 17.2% to 23.7%) occurred in the north-central 
region and in all eastern regions, while the other regions 
had single digit annual rates of increase. The lowest 
annual increases occurred in the southwest and south-
central regions. 
 
In February 2007, the value of South Dakota native 
rangeland averaged $448 per-acre, while the average 
value of tame pasture was $684 per-acre. Native 
rangeland is concentrated in the western and central 
regions of South Dakota, while tame pasture is 
concentrated in the central and eastern regions.    
 
The statewide average values of rangeland and tame 
pasture increased 16.1% and 14.8%, respectively, during 
the past year (Feb. 2006 to Feb. 2007). This is the fifth 
consecutive year that double-digit (>10%) increases in 
both pasture and rangeland values occurred in South 
Dakota.   
 
Average Cash Rental Rate Summary 
The cash rental market provides important information 
on returns to agricultural land.  Cash rental rates are 
quite variable among South Dakota regions.  Within 
each region, the average annual cash rental rates are 
highest for cropland and lowest for pasture and 
rangeland.  For each land use, cash rental rates are highest in the southeast region and lowest in the western 
regions (Figure 4). 
 _____________________________________________                                                                                      
Figure 4.  Average cash rental rate of South Dakota 
nonirrigated cropland, hayland, and rangeland, by 
region, 2007, dollars per acre. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source:  2007 South Dakota Farm Real Estate Market Survey, SDSU. 
 
From 2006 to 2007, statewide average cash rental rates 
increased $3.85 per-acre for cropland, $1.55 per acre for 
hay land, and $0.60 per-acre of pasture/rangeland. The 
average percentage increase in cash rental rates was 
6.3% for cropland, 3.9% for hay-land, and 3.6% for 
rangeland. In general, cash rental rate increases were 
greatest in the same regions where the strongest land 
value increases were reported.  Average cash rental rates 
in 2007 for non-irrigated cropland vary from $21.80 to 
$23.35 per-acre in the western regions to $91.65 per-acre 
in the east-central region and $92.30 per-acre in the 
southeast region. 
 
Hay land cash rental rates in 2007 vary from an average 
of $18.40 per-acre to $18.80 per-acre in western South 
Dakota and from $31.35 to $34.25 per-acre in the north-
central and central regions, respectively.  
 
Rangeland and pasture average cash rental rates vary 
from $9.95 to $11.60 per-acre in western South Dakota 
to $44.00 per-acre in the southeast region. Rangeland 
rates per AUM in 2007 vary from an average of $21.95 
per-AUM in the northwest region to $27.00 per-AUM in 
the north-central region. Rental rates per-AUM increased 
in all regions from 2006 to 2007 except in the southeast 
and south-central regions. 
 
Rates of Return to Agricultural Land 
The gross rent-to-value ratio (gross cash rent as a percent 
of reported land value) is a measure of gross rate of 
return to land, before deduction of property taxes and 
other landlord expenses. In 2007, the statewide average 
gross rate of return (rent-to-value ratio) is 4.9% for non-
irrigated cropland, 4.8% for hay-land, 4.0% for 
rangeland, and 4.4% for all agricultural land. This is the 
second year in the 17 years of this annual survey that the 
statewide average gross rates of return to all non-
irrigated agricultural land is lower than 5%.  
 
Respondents were asked to estimate net rates of return 
to agricultural land ownership in their locality, given 
current land values.  Average net rates of return for 2007 
varied from 4.2% for non-irrigated cropland to 3.9% for 
hay land, and to 3.4% for rangeland and pasture, and 
averaged 3.8% for all agricultural land. This is the third 
consecutive year during the past 17 years that average 
net rates of return for all-agricultural land were below 
4%.   
  
Ag Land Market Factors 
Respondents listed major positive and negative factors 
affecting the farm real estate market in their localities.  
These factors help explain changes in the amount of 
farmland for sale, sale prices, and rental rates.  
 
This year, 30 percent of respondents indicated farm 
profits/crop yields as positive factors in the farm real 
estate market.  Thirteen percent of respondents indicated 
livestock and commodity prices as positive factors.  
Drought / weather conditions and higher input costs 
(especially fuel, energy, and fertilizer cost) were the two 
most common responses cited as negative factors.   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In 2006 and 2007, relatively low interest rates were still 
cited as a positive factor, but increasing interest rates 
were cited nearly as often as a negative factor in the 
farmland market. Government programs, tax incentives, 
and increase in net worth were frequently cited as 
positive factors, while low agricultural returns, few 
young farmers, and small farmer’s inability to compete 
with large operations were often cited as negative 
factors.  Other listed negative factors included farm 
program uncertainty, competition for non agricultural 
uses of farmland, and taxes. 
 
Respondents continue to be divided in the assessment of 
investor interest in farm real estate and continued escala-
  .  Fig 5.  Positive factors in the farm real estate market
Increase in Net Worth 
7%
Investor Purchase 
11%
 
High Demand/Expansion
6%
Tax Incentives 
5%
Other  4% 
 
Low Interest Rates 9%
Government Programs 
5%
Lvstk Prices/Mkts
13%
Hunting/Recreation 
11%
Farm Profits/Crop Yields 
30%tion of farmland prices. High demand for farmland was a 
positive factor (6%), while high land prices and cash 
rental rates were cited as a negative factor (8%). 
Investors (mostly non-local) were listed as a positive 
factor and as a negative factor.  Some respondents stated 
that outside investors are raising land prices to levels 
that are becoming out of reach for local farmers. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Respondents identified major reasons for buying and 
selling farmland. Farm land expansion and investment 
purposes were the most common responses for 
purchasing, along with hunting/recreation.  Retirement, 
estate settlement, and existing market conditions 
continue to be major reasons for selling farmland.  
 
Ninety percent of respondents providing forecasts expect 
land values to increase in the next year, the highest 
proportion of respondents forecasting land value 
increases in 17 years of survey reports.  Most other 
respondents expect no change in land values; only one 
percent forecast a decline in land values next year. The 
median forecast percentage increase is 8% for pasture / 
rangeland and 10% for cropland, compared to average 
(mean) forecasted increases varying from 7.2% for 
rangeland to 8.3% for cropland.   
 
2007 survey respondents are optimistic about further 
increases in farmland values, with very few predicting 
declines in land prices or cash rental rates. Prospects of 
continued increases in input expenses, possible increases 
in long-term interest rates, and growing concerns about 
future Federal farm program legislation are not sufficient 
to change their optimistic outlook.  Major increases in 
2006 crop prices and prospects for continued higher crop 
prices for the next few years are fueling this optimism. 
 
Prospective buyers and investors, enamored with low 
interest rates and often perceiving higher prospective 
cash returns from crop / forage production for bio-
energy sources are investing in farmland. In this 
speculative market situation, it may take considerable 
increases in general price inflation and interest rates, and 
farm price / production declines to take the “steam” out 
of continued upward pressures on land values. 
 
For more detailed information, a full copy of  South Dakota 
Farmland Market Trends, 1991-2007, by Janssen and 
Pflueger,  will published in the coming weeks.  Copies should 
be available from your County Extension Office. It may also 
be accessed at:  http://agbiopubs.sdstate.edu/articles/C272.pdf  
NOTE:  This special edition of the Commentator is being 
made available electronically on our website at:  
http://econ.sdstate.edu/research/commentator/no489.pdf  .  
Our policy remains to provide electronic copies several weeks 
after our subscribers have received the newsletter. 
ECONOMICS COMMENTATOR 
DEPARTMENT OF ECONOMICS              http://econ.sdstate.edu 
South Dakota State University           Phone:  (605) 688-4141 
Box 504                    Fax:  (605) 688-6386 
Brookings, SD  57007-0895        E-mail:  Stover.Penny@sdstate.edu 
100 copies of this newsletter were produced at a cost of less than $100
 
 
SOUTH  DAKOTA  STATE  UNIVERSITY          
Economics Department 
Box 504 
Brookings, SD  57007-0895 
 
Address Service Requested 
 
 
 
 
 
 
 
 
 
 
 
 
 
.  Fig. 6 Negative factors in the farm real estate market
Higher Input
 Cost 
16%
Increased Interest Rates
6%
Low Ag Returns 
5%
Drought/Weather 
19%
High Land Prices/Rents 
8% 
No Young/Small  
Farmers /  
Can’t Compete 
6%
Outside Investors 
9%
None 10% 
 
Other 
21%

South Dakota Agricultural Land Values and Cash Rental Rates, 2007

http://repec-sda.sdstate.edu/repec/sda/pdf/Commentator/No489.pdf

South Dakota Agricultural Land Values and Cash Rental Rates, 2007

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