NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
April 6, 2000
The average value of North Dakota cropland declined 2 percent during the past year and now stands at $425 an acre. Meanwhile, average cash rent dropped 0.5 percent, to $32.60 per acre. While the cash rent decline is minimal, pockets of weakness are beginning to show up in some areas of the state.
These calculations, based on recent surveys conducted by the North Dakota Agricultural Statistics Service, were made by two agricultural economists with the North Dakota State University Extension Service.
"The drop in North Dakota's cropland values is significant because it marks the second consecutive year of decline," says Andrew Swenson, extension farm management specialist at NDSU. "Trend shifts in the past have extended several years. For example, land prices increased sharply from 1973 to 1981, decreased every year from 1982 to 1987, and then increased from 1988 to 1998."
The decline in land values is reflective of the uncertain outlook for net farm income and the need for farmers' balance sheets to "mend" after some difficult years in 1997 and 1998 statewide, and earlier in the Red River Valley, Swenson says. For many producers, 1999 was a good year financially because of the extra income they received in the form of disaster payments and crop insurance indemnity payments, but those 1999 levels of government assistance were an aberration.
Estimates for the year 2000 show that average North Dakota cropland values now range from $869 an acre in the south Red River Valley to $268 in the state's southwest farming region, Swenson says. In between those extremes are the following farming regions: southwest central, $296; northwest, $326; northwest central, $389; northeast central, $393; southeast central, $430; and north Red River Valley, $689. Compared to 1999, cropland values were down everywhere except in the southeast central and northwest central regions.
"A very important factor affecting land value and rent in the years ahead will be farm policy," Swenson says. "The scheduled Agricultural Market Transition Act (AMTA) payments decline under the current farm bill. Relative to the 1999 AMTA payment, the year 2000 payment will be about 90 percent, and payments in 2001 and 2002 will be about two-thirds--and then they will be terminated."
Turning to the cash rent scenario, the latest survey by North Dakota Agricultural Statistical Service signals weaker cash rents for non-irrigated crop land in North Dakota, says Dwight Aakre, extension farm management specialist at NDSU. The largest decline was $4.80 per acre in the average reported cash rent in Grand Forks County, a drop representing a 10-percent decline from the 1999 survey.
Other counties with large decreases included: Bowman, down 9.8 percent; Walsh, down 8.9 percent; McLean, down 8.8 percent; Mountrail, down 8.4 percent; Golden Valley down 7.3 percent; and Traill, down 6.1 percent.
All counties in the Red River Valley, except Pembina County, showed lower average cash rents in this year's survey. Aakre says, "The valley has been hit with too much rain, quality problems and difficult conditions in both the potato and sugarbeet industries. This combination of problems has led to less competition to rent land."
The Devils Lake area has experienced the same problems with too much rain and poor quality production, Aakre says. Yet, Ramsey County land rents declined only 60 cents per acre and Benson County rents increased by 80 cents per acre.
While several counties showed significant declines in average rental rates, there were still 29 counties that reported higher rental rates over the previous year, Aakre says. Three counties--Logan, Sheridan and Towner--reported no change in average rates from last year. The largest increases were in Dickey County, where the average rate increased 8.9 percent. Likewise, the Stutsman County rate was up 7.86 percent and Barnes County up 3.86 percent.
"It will be interesting to see what the future holds for the rental value of farmland," Aakre says. "Farm program payments are readily bid into land rental values and these payments have been generous in recent years. Further declines in rental values could materialize if government payments begin to decline and/or the major crop producing countries of the world continue to experience good production. The 1996 Farm Bill ushered in an era of no-holds-barred production, and in the absence of increased demand, increased production (supply) likely means lower prices and resulting lower rental values.
"On the other hand," Aakre says, "should one or more of the world's major producing regions experience a significant shortfall in production, world food supplies would tighten enough to allow significant price increases. This scenario would shore up rental values."
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Sources: Andrew Swenson (701) 231-7379
Dwight Aakre (701) 231-7378
Editor: Dean Hulse (701) 231-6136
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