Johnson, referring to the limited amounts of irrigated land in southeast Nebraska, believes a few major land purchases may have skewed slightly the statewide percentage increase in irrigated land values.
Water availability or lack thereof has become a significant driver of land values in Nebraska. Natural resources districts have shut off well drilling in half of Nebraska and at least five of the 23 NRDs have some type of pumping allocation in place. "The presence of water moratoriums across much of the state precludes irrigation development, even if groundwater sources exist. But bidding is spirited when there is irrigation water available, Johnson says.
"It's a scary market in a way, where buyers are out there looking for water," he adds, referring to the possibility of irrigated acreage topping out in Nebraska.
Dryland crop values also varied greatly across the state. In the northwest and north districts, the value gains were under 10%, while values reported were more than 30% in the south and southern districts.
Drought has taken a heavy toll on forage production in Nebraska—reducing it by 50% or more during the 2012 grazing season. Even so, rangeland and pasture values still rose. "Forage shortfalls for cattlemen may have actually caused a more spirited bidding for additional land just to maintain their cow numbers," he speculated. "Unfortunately, even if the drought ends quickly, it may be several years before gazing capacity may be able to return to pre-drought levels."
He's heard of some ranchers drilling wells to irrigate alfalfa or other forages to make up for the drought-induced forage shortage.
In compiling this year's survey, Johnson heard on many occasions from his survey reporters that land prices being paid seem over-optimistic. "When asked what they expected land value movements to be for the remainder of 2013, as well as out three to five years, the vast majority saw a market which had topped out with little if any upward movement in the near futures. In fact, a sizable number of reporters thought values could weaken somewhat in the next few years."
Johnson is somewhat unsettled by what he sees as potential low rates of return for high-end auction sales, particularly in parts of southern Nebraska. He cited sales of irrigated land approaching or exceeding $12,000 an acre.
For the full report, go to agecon.unl.edu and click on the Cornhusker Economics for March 21.