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Published June 16, 2014, 09:46 AM

Rise in ag land prices slows

Upper Midwest agriculturalists have wondered when the big, multi-year run-up in farmland prices will end, or at least slow. A new study in South Dakota indicates the upturn might be running out of steam.

By: Jonathan Knutson, Agweek

Upper Midwest agriculturalists have wondered when the big, multi-year run-up in farmland prices will end, or at least slow. A new study in South Dakota indicates the upturn might be running out of steam.

Cash rental rates and land values for both cropland and nonirrigated hay land rose relatively modestly in 2014, according to the new South Dakota State University South Dakota Farm Real Estate Survey.

“We definitely saw a slowdown. Values had still gone up, but not to the extent they had in the past,” says Kim Dillivan, SDSU crops business management field specialist, who worked on the survey.

Cash rental rates for South Dakota nonirrigated cropland averaged $150.10 per acre in 2014, up 4 percent from a year earlier. In comparison, annual increases of 18.8, 22.8, and 14.1 percent were reported in 2013, 2012,and 2011, respectively, according to the survey.

The value of nonirrigated cropland in the state averaged $4,478 per acre, an increase of 5.4 percent from a year earlier. In comparison, annual increases of 37.8, 29.1, and 17.7 percent were reported in 2013, 2012, and 2011, respectively, according to the survey.

Crop prices dropped sharply in 2014, which almost certainly contributed to the relatively small increase in rental rates and land values, Dillivan says.

It’s also possible that some people who had been buying farmland as an investment began turning to alternatives, he says.

The average 2014 cash rent for nonirrigated hay land was $84.40 per acre, up 6.4 percent from a year earlier. In comparison, the average cash rent increased 20.4, 15.3, and 10.9 percent, in 2013, 2012 and 2011, respectively.

The average 2014 hay land value was $2,548 per acre, up 7.6 percent from the previous year. In comparison, the average land value rose 30, 27.7, and 15.2 percent in 2013, 2012 and 2011, respectively.

Drought in South Dakota ended in 2013, which probably helped hold down the 2014 increase in hay land values and rental rates, Dillivan says.

The statewide averages included big differences across South Dakota, with prices lowest in the eastern part of the state and lowest in the west. That reflects the land’s relative productivity, according to the survey.

The survey received responses from 224 people, primarily real estate agents, farm managers, Farm Service Agency personnel and ag bankers.

The responses provide a good representation of the entire state, and are considered accurate and reliable, Dillivan says.

More information on trends in South Dakota ag land prices: www.igrow.org/ up/resources/03-7000-2014.pdf.

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