North Dakota Sees Farmland Values Rise "Only" 5% In 2009

Published on: 17:36PM Apr 15, 2010

Mike Walsten

The value of North Dakota cropland rose about 5% in 2009 recent survey results shows, states Andrew Swenson, North Dakota State University Extension farm management specialist. Swenson's analysis is based on survey data compiled by the North Dakota Agricultural Statistics Service. While a positive gain, he notes the percentage increase is down compared to the average annual increases of recent years.

"This (the 5% increase) indicates a noticeable slowdown or leveling of land values when compared with the average annual increase of more than 12% during the previous six year," he states. Looking back at the six-year period, he observes: "There were only two periods during the past 100 years that had longer periods of continuous, strong increases in land values. There was an eight-year period (1942 through 1949) with an average annual increase of 10% and a nine-year period (1973 through 1981) that averaged a whopping 18% annual increase."

Looking ahead, Swenson expects a further leveling of land values. The biggest negative is that projected crop profitability for 2010 is the most challenging in several years. Some other important factors include interest rates, farm balance sheets (ability to purchase land) and the general economy. However, the largest wild card remains grain prices and their impact on crop profitability.

"Low interest rates are a positive factor," Swenson notes. "Interest rates to finance land purchases are attractive, while returns and confidence on alternative investments have been weak. If there is a general rise in interest rates, it will make it more difficult for producers to cash flow land purchases with debt capital and make the returns on certain fixed return investments more competitive with investments in land."

The largest increase in cropland values was in the nortwestern region at 11% ($527 per acre), followed by gains of around 9% in the southeastern part of the state ($1,481 per acre and 7% in the southern Red River Valley ($2,136 per acre). Increases in the southwestern, northeastern, south-central and northern Red River Valley regions ranged from 6.5% to 4% at $598, $887, $712 and $1,546 per acre, respectively. Cropland values were flat in the north-central and east-central regions at $756 and $957 per acre, respectively.

He also notes cropland rents (January 2009 to January 2010) increased less than 2% on average, down from the strong 7% gain seen the previous years. The rate of increase for cropland rents was the strongest at 6% and 7% in the southeastern region ($67.20 per acre) and south-central region ($37.20 per acre).

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