Despite persistent drought and odds for weaker earnings down the road, Nebraska land values continue to rocket upwards. Clouds on the economic horizon, however, signal a leveling off in land values soon and perhaps a softening within the next three years.
The current contrast of drought and buyers bidding up land prices has Bruce Johnson, University of Nebraska ag economist, shaking his head. "If you look at the U.S. Drought Monitor map, Nebraska is the epicenter of the drought," he says. "But it has been the epicenter of the land boom the past few years, too."
The preliminary 2013 Nebraska Farm Real Estate Market Development Survey, released this week, shows the Nebraska's all-land average value rise 25% over the 12 months, ending Feb. 1. 2012.
The 2013 all-land value of $3,040 an acre is more than double the value just three years ago, in early 2010, according to Johnson, who coordinates the annual land values survey. "Few would disagree that this period has clearly been a land boom," he says.
While there were gains in all farmland classes from a year ago, the variation across classes of land and regions of the state was stark.
Center-pivot irrigated land classes in Nebraska were generally strong in every region, showing a big jump of 27% statewide and an average of $7,415 an acre statewide. "Drought conditions no doubt buoyed up market demand for irrigated cropland," he says. "Income flows from irrigated land have been phenomenal in recent years. It was no exception in 2012. The combination of favorable irrigated crop yields plus widespread drought across the nation's Corn Belt fueled high commodity prices."
In the southern districts of Nebraska, there were significant jumps over a year ago in both center pivot and gravity irrigated cropland, in the range of 34 to 38%. (Gravity irrigated acres today represent only 20% of the state's total irrigated land, however.)