Factors Influencing Agricultural Land Values in Nebraska

Deborah Bridges
University of Nebraska at Kearney

Agricultural production cannot take place without the land resource, which makes land an important asset to the agricultural sector. At the national level, farm real estate accounts for nearly 75 percent of total U.S. farm asset value; of that 75 percent farm buildings account for only about one-fifth (Tsoodle, et al., 2003). Farm real estate, or land, values are used to measure wealth and are a major determinant of the agricultural sector’s net worth (or equity). In addition, since land serves as loan collateral for additional land, machinery, or other equipment, the value of land determines the amount of money that can be borrowed. Thus, land values serve as an indicator of the overall financial health of the agricultural sector and provide the motivation for much of the research into the determinants of agricultural land values.

As the predominant industry in Nebraska, agriculture represents the state’s largest land user and the primary source of wealth. Approximately 45.7 million acres (or 93%) of Nebraska’s total land area of 49 million acres are in agricultural production (NASS, 2005). At present, there are 48,000 farms and ranches in Nebraska and the average farm size is 952 acres. In 2005, the total assets of the agricultural sector totaled $47.9 billion; of which $36.6 billion (or 76%) was real estate. Total market value of agricultural production for Nebraska totaled $9.7 billion in 2005; of the total, crop sales accounted for 35% (or $3.4 billion) and livestock sales accounted for 65% (or $6.3 billion). These figures illustrate the importance of agriculture to Nebraska’s economy and highlight the importance of land in agricultural production.

Purpose and Objectives

       Land is an important asset in agricultural production in Nebraska. However, the recent rapid increases in land values observed in farm real estate values raise two questions: 1) what factors are contributing to the continued rise in land values, and 2) will this upward trend continue or will land values fall as they did in the mid-1980s? An evaluation of agricultural land values in Nebraska is undertaken to determine answers to these questions.

       Understanding the factors affecting agricultural land values is important for assessing the overall financial well-being of this important sector of Nebraska’s economy. The objective of this project is to examine and identify the factors contributing to rising agricultural land values in Nebraska and what the implication might be for the financial situation of Nebraska producers. The discussion is organized in the following manner. The first section examines the characteristics that make the land resource unique. The second section examines some of the factors affecting land values identified in the literature and what this implies for Nebraska. The third section presents the preliminary findings from an evaluation of land values in Nebraska and the discussion concludes with an overview of what future endeavors in this area of research may entail.

Characteristics of the Land Resource

       Land is the major productive resource used in agriculture, and the value of land plays an important role in determining the financial well-being of the agricultural sector. But what are the characteristics of land which make it unique? Land is unique because of its permanence, heterogeneity, fixed supply, and low market activity.

       Land is considered a permanent resource. Land is a durable, immobile resource that does not wear out, provided appropriate conservation methods are used and soil fertility is maintained. Land’s immobility means that it cannot be transported to be combined with other inputs in the production process; instead other inputs must be transported to the land for production to take place. Land’s durability translates into an asset with an infinite life, thus land is considered a non-depreciable asset.

       Land is a heterogeneous resource. Land differs by soil type, drainage, slope, and fertility; thus no two parcels of land are the same. Land’s heterogeneity means that productivity and agricultural production differs across regions. Since the most profitable use of land is determined by economic factors such as relative commodity prices, production technology, and competing uses, land’s heterogeneity also indicates that land use, and its value, will differ across geographic areas. The heterogeneity of land and its associated property rights, translates into an asset that can be owned, with each land parcel having its own legal description identifying its particular location, size, and shape.

       The supply of land suitable for agricultural production is essentially fixed. This combined with land’s immobility makes the price of land very sensitive to changes in demand for the products produced on the land or changes in the value of alternative uses of the land. Limited supply combined with permanence and heterogeneity means that the availability and value of land can differ substantially across geographic areas.

       Land is a resource with low market activity. On an annual basis, only a small percentage, somewhere between 3 and 5%, of land changes hands each year (Barry, et al., 2000). This low market activity, in both lease and purchase markets, not only makes it difficult to find current information on prices, it also means that changes in profitability are capitalized fairly quickly into land values and rents. Thus, it is the land owner that receives the economic benefits or losses associated with changes in the profitability of agricultural commodities and/or land values.

       The importance of the land resource in agricultural production means that it has monetary value. However, determining the value of land is complicated by low market activity and by the interaction of other factors that influence land values.

Factors Affecting Land Values

       Land is an important asset in agricultural production, as evidenced by the numerous studies in the literature devoted to examining the factors influencing land values and coverage of the land investment decision in most undergraduate courses in agricultural finance and/or farm and ranch management. Studies in the literature focus on movements of land prices, while course work typically approaches the topic in terms of the maximum dollar price an individual producer could pay for the land and/or if the investment is profitable. Often, the price of land is used interchangeably with the value of land in the literature.

       However, there is evidence from research that suggests that land prices are comprised of four identifiable components, three of which determine land values and the fourth determines land prices. The value of land is determined by the productive, speculative, and consumptive components, and that the price of land is determined by the transactional component (Tsoodle, et al., 2003).

       The productive component reflects the income earning potential of land used in agricultural production. Agricultural commodities (crops, livestock, forage) have value in the market, and sales of these commodities represent potential income generated by the land. Thus, the foundation for most land value studies has been the Capital Asset Pricing Model (CAPM), which uses the present value approach in discounting revenue flows to determine the value of an income-producing asset. Under the CAPM approach, the basic valuation formula expresses the value of land (V) equal to the expected annual farm income or rent (PMT) divided by the opportunity cost of capital (i), also referred to as the discount rate (Kay and Edwards, 2004; Barry, et al., 2000; Chavas and Thomas, 1999). For example, if the annual net return per acre is $87 and the opportunity cost of capital is 8%, then the land’s value is equal to $1,086 per acre (V = 87 ÷ 0.08). In addition, given the fixed supply characteristic of land, changes in land prices (or value) stem from the demand side of the market (Burt, 1986; Shi, et al., 1997). Thus, land values are impacted by changes in the expected future income stream due to changes in rent, technology, government payments, and/or relative value of production, as well as changes in the discount rate.

       The productivity of the land determines the amount of revenue or income, often represented by the cash rental rate per acre, derived from the land which in turn determines the land’s value. Given the geographic, or regional, differences in land productivity, land values and the most profitable use of land also differ by region. Additionally, any changes in production practices that lower costs and/or increase output levels lead to higher rental rates, due to increased profit potential, and contribute to rising land values (Burt, 1986; Alston, 1986). Research has suggested that much of the year to year movements in farmland prices are the result of temporary boosts in productivity or weather resulting in changes in profitability (Falk and Lee, 1998). Export demand, an important determinant of farm income, also plays a role in determining agricultural land values, especially in periods of strong export demand (Runge and Halbach, 1990). The income stream and/or cash rental rates, which represent the productivity of the land, are considered to be the primary determinant of agricultural land values.

       Government payments represent additional income, beyond that earned from selling the commodity produced; thus, added revenue due to government payments contribute to rising land values and cash rental rates. Additionally, the relative certainty associated with government programs result in these payments being viewed as a more stable source of income than sales revenue (Weersnik, et al., 1999), with the economic benefits accruing to the land owner as these payments are capitalized into land values (Ryan, et al., 2001; Barnard, et al., 2001). One estimate suggests that government payments are responsible for approximately 15 to 25 percent of the capitalized land value in the U.S. (Weersnik, et al., 1999). As a source of revenue, government program payments contribute to increased profit potential which is ultimately factored into land values, benefiting the land owner primarily through capital gains when the land is sold or through an improved equity position on the farm’s balance sheet.

       The consumptive component represents the intrinsic value of land to the owner (Pope and Goodwin, 1984). Many investors have an innate desire to own land, live in a rural environment, engage in outdoor recreation, get back to nature, or live the lifestyle of a rancher or farmer. Other investors seek an investment that is tangible, one that can be felt, touched, experienced, and enjoyed. Some investors seek rural land ownership with the expectation of being able to resell the land to others with similar feelings towards the land. Thus, investors who are seeking these real or perceived benefits of rural land ownership influence the value of land. Ultimately, the impact of the consumptive component on land values will depend on income levels, population levels, location and levels of urbanization, and the specific site characteristics of the land (Pope and Goodwin, 1984).

       Recognition of the consumptive component in determining land values has led some researchers to utilize the hedonic price model to examine land values. Hedonic price models are based on the idea that the price of a heterogeneous good is determined by its intrinsic qualities. Thus, the price of a parcel of land can be estimated using its site specific characteristics such as soil productivity, amenities, and water availability. The results of two recent hedonic price studies (Tsoodle, et al., 2003; Drescher, et al., 2001) found that while the price of land is driven primarily by the income producing capability of the land, other factors, such as location, amenities, proximity to metropolitan areas, and potential demand for conversion to non-agricultural uses also influenced land prices. One important finding is that in areas with more intensive agriculture, there was greater demand for farmland which translated into higher land prices (Drescher, et al., 2001).

       The speculative component is reflected in the buyer’s expectations about the future direction of agricultural land values (Tsoodle, et al., 2003). Land values tend to follow trends, whether positive or negative and buyers form expectations about whether those trends will continue in the same direction. In other words, the speculative component implies that individuals become participants in the agricultural land market because they have an expectation that the future direction of those land values will result in the land investment generating returns beneficial to them, typically in the form of capital gains (Lee and Rask, 1976; Castle and Hoch, 1982). Thus, factors influencing the speculative component include current trends in land prices, levels of cash rents, interest rates, the rate of inflation (Lee and Rask, 1976; Tsoodle, et al., 2003; Castle and Hoch, 1982).

       The transactional component determines the price of land, while the productive, consumptive, and speculative components contribute to the value of land (Tsoodle, et al., 2003). The transactional component represents the specifics of the transaction between the buyer and seller, and includes items such as special considerations given to either party or the nature of sale (e.g., foreclosure or forced sale, sales to relatives, owner or special financing, etc.). Other factors influencing the transactional component include the size of the parcel or other site specifics, and the value of any improvements (e.g., buildings, water, sewer, etc.). The current value of land to an individual depends, in part, on their particular discount rate, income expectations, credit terms, and income tax situation (Lee and Rask, 1976). It has been argued that since only price is observable, any attempt to estimate land values should include the factors influencing the transactional component of land (Tsoodle, et al., 2003).

       As illustrated in the discussion above, the monetary value of land is determined by the interaction of several factors. In addition to the productive, consumptive, speculative, and transactional components outlined above, other factors, such as efficiencies and economies of scale, financial conditions, attractiveness as an investment, and the buyer’s intended use have also been identified as factors influencing land values (Kay and Edwards, 2004; Barry, et al., 2000).

       Machinery and equipment are used to work the land and thus there are efficiencies and economies of scale associated with land use. Many of the advances in machinery and equipment require a larger land base to gain all the economic benefits from adoption, however, many of these economies of size and the opportunity for greater profits can be achieved only by expanding the size of farming operations. This combined with the fixed supply of land means that producers looking for ways to expand put upward pressure on land values, especially on a regional basis, and these increases have a beneficial impact on producer’s equity.

       Land purchases require large sums of money, and often the land is purchased using borrowed funds. Thus the interest rate, which is determined by macroeconomic conditions and the performance of the overall economy, influences the value of land. Other macroeconomic conditions, such as the inflation rate and currency exchange rates, also influence the value of land (Alston, 1986; Runge and Halbach, 1990).

       Land is often purchased as an investment and the attractiveness of that investment has an influence on land values. Investing in land is often used as a strategy to hedge against inflation, primarily because increases in land values have kept pace with or exceeded the rate of inflation (Barry, et al., 2000). Thus, buyers in the agricultural land market include producers as well non-farm investors. The participation of non-farm investors imply that the rates of return available from other investments also affect the demand for and value of farm land (Barry, 1980). The attractiveness of land as an investment is related to the speculative component and can result in buyers being willing to pay more for land than the land’s income earning potential suggests it is worth.

       Land has many uses, such as recreation and housing, other than in producing agricultural commodities which implies the buyer’s intended use plays an important role in how much the land is worth. Land values are also influenced by special factors that may differ among potential buyers, such as how badly they want a parcel of land or their line of credit. Changes in farmland prices have been related to the land’s relative location and distance from urban areas (Shi, et al., 1997; Drescher, et al., 2001) and the potential demand for conversion of land to non-agricultural use (Drescher, et al., 2001). Although in some regions non-farm investors have been important purchasers of land, the large majority of land buyers are still agricultural producers desiring to expand the size of their operations and take advantage of larger scale technologies (Kay and Edwards, 2004). The buyer’s intended use, represented by competing uses such as residential and/or industrial development and recreation use, are related to the consumptive component may push the market price of land higher than its use in agriculture would justify and contribute to differences in land values across geographic regions.

       The discussion above identifies several factors that may play an important role in the recent changes observed in Nebraska land values. Given that agriculture is the predominant industry in Nebraska, it is expected that the income generating capacity of the land, including government payments, will be a major factor in determining agricultural land values. However, the literature reviewed above indicates that population density relative to the intensity of agricultural production will play a role. In other words, growing populations would suggest a growing demand for converting farm land into non-agricultural uses. Examining farm numbers, land in farms and population levels should provide insight about whether this is contributing to rising land values in Nebraska. The following section examines some of the factors influencing land values in Nebraska.

Examination of Land Values in Nebraska

       The data used in the examination of factors influencing agricultural land values in Nebraska are taken from a variety of USDA and other government publications. Data reported for farm real estate values represent the combined value of land and buildings. Since land accounts for the majority of this value, real estate values are used to represent the value of land in the analysis. Data on state-level population was taken from the Census Bureau. All monetary figures are nominal values. The USDA includes Nebraska in the Northern Plains production region along with North Dakota, South Dakota, and Kansas. However, the types of crops produced and the use of irrigation means Nebraska has more in common with states in the Corn Belt production region (Ohio, Indiana, Illinois, Iowa, and Missouri). Thus, in attempting to determine what factors are influencing land values in Nebraska, a comparison between the U.S., Nebraska, Northern Plains, and Corn Belt production regions is conducted. Similarities and/or differences in observed trends may help explain some of the more pertinent factors influencing land values in Nebraska.

       A comparison of average value of farm real estate (land and buildings) for the U.S., Nebraska, Northern Plains, and Corn Belt is presented in Table 1. In general, as indicated in Table 1, land values have steadily increased since 1950; however, land values experienced a rapid increase in the 1970s followed by a relatively sharp decrease in the 1980s. As shown in Table 1, land values in Nebraska increased from $154 in 1970 to $635 in 1980 (312% increase), declined to $524 in 1990 (17% decrease), and have since risen to $910 in 2005. Land values in the Northern Plains and Corn Belt regions followed similar patterns. For example, between 1970 and 1980, nominal land values increased 289 percent and 339 percent in the Northern Plains and Corn Belt regions, respectively. However, the downturn in land values hit the Corn Belt region harder, with a decline in 32 percent compared to the 17 percent decline observed in the Northern Plains region.

       Although a combination of economic factors caused the changes in land values observed during the 1970 – 1990 period, changes in the inflation rate is considered to be the primary factor. Rapid rise in demand for grains in the world market contributed to inflationary pressures and the large increase in land values during the 1970s. In real terms, after adjusting for inflation using the GDP Implicit Price Index (2000 = 100), the changes in Nebraska land values are even more dramatic. Nebraska land values, in real terms, increased from $559 in 1970 to $1,175 by 1980, declined to $642 in 1990, and have since risen to $812 per acre. Similar changes occurred in the Northern Plains region where real land values increased 98 percent between 1970 and 1980 (from $453 to $898) and decreased 45 percent between 1980 and 1990 (from $898 to $492); land values in the Corn Belt region increased 124 percent (from $1,360 to $3,041) then declined by 55 percent (from $3,041 to $1,363) between 1970 and 1980 and 1980 and 1990, respectively.

       During the 1970s the increase in export demand for agricultural commodities and inflationary pressures resulted in rapid gains in land values. The gains in land values, which exceeded the rate of inflation, helped give rural land a reputation as a good investment or hedge against inflation (Pope and Goodwin, 1984). For example, Nebraska land values increased by 312% in nominal terms (from $154 to $635) between 1970 and 1980, while the GDP Implicit Price Index (2000 = 100) increased by only 96% (from 27.534 to 54.043). However in the early 1980s, the implementation of restrictive monetary policy to control inflation led to lower inflation rates (from 9.4% in 1981 to 3.4% in 1983) and higher real interest rates. These changes combined with declining returns in the agricultural sector, due in part to drought, reduced export demand, and low commodity prices, resulted in a period of extended financial difficulty in agriculture, referred to as the “farm crisis” (Pope and Goodwin, 1984; Collender, 1999; Kay and Edwards, 2004; Barry et al., 2000). This period, from 1981 to 1987, was characterized by a rapid decline in land values as many agricultural producers, unable to make payments on debt, tried to sell farm land. However, buyers were leaving the land market due to higher interest rates. The combination of more sellers and fewer buyers resulted in a rapid decline in land values. For example, nominal land values in Nebraska declined from $635 in 1980 to $524 in 1990 (a decrease of 17%). The downturn in land values meant many producers were forced to sell their land at a loss and/or watched as their equity declined. Although the downturn did serve to remind investors that capital gains in the land market depend on market factors and are not automatic, the decline in land values were not equally distributed (Table 1) and some of the largest observed occurred in the Corn Belt (Falk, 1991; Barry et al., 2000; Kay and Edwards, 2004).

       Despite the boom-bust-boom cycle in agricultural land values illustrated in Table 1, land values in Nebraska have trended upward since 1950, and have experienced substantial gains since 1990. For example, land values in Nebraska have increased from $710 in 2000 to $910 in 2005, a 28% increase (in nominal terms). In some respects, this rapid upturn in land values is reminiscent of the period before the farm crisis and raises questions about the factors contributing to this upward trend.

       Studies in the literature suggest that in areas of intensive agriculture it is the competition between producers looking to expand the size of existing enterprises that contributes to rising land values. Other studies suggest the conversion of agricultural land to non-farm use puts upward pressure on land values. However, it is reasonable to assume that both of these demand factors, at least at the state level, would not occur at the same time. An examination of land in farms, farm numbers, and population levels should provide insight into which factor is contributing to changes in land values in Nebraska.

       A comparison of land in farms and number of farms for the U.S., Nebraska, Corn Belt and Northern Plains regions for selected years are presented in Table 2. In Nebraska, farm numbers declined from 73,000 in 1970 to 48,000 in 2005 (a 34% decrease). Although farm numbers have declined in Nebraska, the rate of decline during the 1970 to 2005 period is slightly less than the decline in farm numbers for the Corn Belt region, and slightly higher than the decline for the U.S. and the Northern Plains. Between 1970 and 2005 farm numbers declined 31 percent in the Northern Plains (from 252,500 to 174,200), 37 percent in the Corn Belt (from 641,000 to 402,000), and 29 percent in the U.S. (from 2.9 to 2.1 million). However, farm numbers alone do not fully explain the upward trend observed in land values; rather an examination of the land in farms is also necessary.

       As shown in Table 2, the land in farms in Nebraska has remained fairly stable since 1970, even though farm numbers have declined. In 1970, Nebraska had 48.1 million acres in agricultural use and 45.7 million acres in 2005, or a decrease of 4.99 percent. Nebraska had the smallest decline in land in farms during the 1970 to 2005 period when compared to the changes observed for the U.S. (15%) and the Northern Plains (5.1%) and Corn Belt (11%) regions. These differences suggest that the factors affecting land use in Nebraska and the other regions may not be the same; differences which would be reflected in the land values for the areas.

       Reduced farm numbers with approximately the same amount of land in agricultural use has led to an increase in average farm size in Nebraska, from 659 acres in 1970 to 952 acres in 2005 (a 44% increase). During the 1970 to 2005 period, average farm size in Nebraska has increased more rapidly than observed for the U.S. (19%), the Northern Plains (38%), and Corn Belt (42%). Farms tend to be larger in Nebraska, due in part to the topography and crops produced, than in the Corn Belt region. For example, in 1970 and 2005 average farm size in Nebraska was 659 and 952 acres, respectively, and in the Corn Belt region it was 206 and 294 acres, respectively. Given that Nebraska’s total land mass is 49 million acres, the current acres used in agriculture (45.7 million) represents 93% of the state’s total land mass. This combined with increasing average farm size suggests that Nebraska would be considered an agriculturally intensive state, thus competition between existing farmers seeking to expand farm-size may be contributing to rising land values.

       Changes in population, and the proportion of population considered urban or rural, provides an indicator of the strength of demand for converting land to non-farm uses (e.g., housing, industrial development, etc.). Table 3 presents a comparison of population and the proportion of urban and rural for the U.S., Nebraska, and the Northern Plains and Corn Belt regions. As indicated in Table 3, total population levels in Nebraska have changed little since 1980, experiencing an 11 percent increase between 1980 and 2004. During this time period, Nebraska has experienced a smaller change in population levels compared to the U.S. (23%) and Northern Plains (11.6%), but a slightly larger change than the Corn Belt (10.1%). It is also interesting to note that Nebraska’s population is still primarily rural, as is the Northern Plains region while the U.S. and the Corn Belt region have populations that are predominantly urban. For Nebraska, these small changes in total population levels, which are still primarily rural, combined with declining farm numbers with increasing farm sizes suggests that changes in land values are due more to the competition between farmers than to conversions of land to non-farm use.

       The income generation potential of land, including government payments, is an important component of land values. Table 4 provides a summary of the average net cash income and government payments per acre, for selected time periods, for the U.S., Nebraska, Northern Plains, and Corn Belt. The figures reported for net cash income include direct government payments. As indicated in Table 4, net cash income has trended upward since the 1950s, with a large increase observed in the 1970s. However, government payments, which have also increased, have played an increasingly important role in income levels since the 1980s. For example, direct government payments contributed an average of $12.85 to the total net cash income of $38.79 (or 33%) during the 1980s; while income has increased to $55.33 during the 2000-04 period, so has the contribution from government payments ($20.40 or 37%). As shown in Table 4, government payments have made contributions to net cash income in a similar fashion for the U.S., Northern Plains, and Corn Belt. It also should be noted that the increase in government payments observed since 1980 corresponds to the upward trend observed in land values.

       As discussed earlier, many of the studies reported in the literature use cash rental rates to represent the income earning potential of land and have shown that increases in rental rates correspond to rising land values. A comparison of land values, cash rental rates, government payments, and net cash income for Nebraska during 1991 to 2004 is presented in Table 5. The monetary values are in nominal terms and cash rental rates, both irrigated and dryland, are reported. As shown in Table 5, both cash rental rates and land values have increased since 1991. During the 1991-2004 time period, the level of net cash income and government payments have fluctuated, but generally speaking have trended upward. It is interesting to note that cash rental rates, especially for irrigated crop ground, increased substantially in 1997, as did government payments. This increase corresponds to a period of strong export demand for crops and the passage of the Federal Agricultural and Improvement and Reform Act (FAIR) of 1996 which included provisions for fixed, but declining lump sum payments to participating producers for the period 1996 – 2001. As shown in Table 5, government payments remained fairly large during the 1997 – 2001 time period, and these payments correspond to both rising rental rates and land values. In addition, cash rental rates and land values have continued to increase since 1991 even when government payments and net cash income have declined. This suggests that government payments are being capitalized into cash rental rates and land values in Nebraska, a situation consistent with findings reported in the literature.

Summary and Conclusions

       Land is an important asset in agricultural production in Nebraska and the value of land provides a measure of the overall financial well-being of the agricultural sector. Although land values have been trending upward since the early 1990s, the rapid increases since 2000 have raised questions about whether or not this trend can continue or if another period of financial difficulty, as in the 1980s, is imminent.

       This study used data on land values, land in farms, number of farms, population levels, cash rental rates, net cash income, and direct government payments to determine what factors are contributing to the rise in land values in Nebraska. Preliminary analysis revealed the following information about land values in Nebraska. The majority of Nebraska's land mass is devoted to agricultural use. While farm numbers in Nebraska have declined since 1950, land in farms has remained stable resulting in increasing average farm size. This combined with small changes in total population levels and a population that is predominantly rural, suggests that Nebraska would be considered an agriculturally intensive state. Government payments contribute to the income generating potential of land. Government payments have contributed substantially to net cash income for Nebraska since 1991. Examination of both cash rental rates and land values in Nebraska suggest that not only are government payments contributing to the upward trend in land values, but are also being capitalized into the value of land and cash rental rates. The increase in farm size combined with rising land values suggest that it is the competition between existing agricultural enterprises seeking to expand that is contributing to the rise in land values in Nebraska.

       While the preliminary examination of land values in Nebraska suggest that the conversion of land to non-farm uses is having minimal influence on the value of land, further analysis is needed to come to a definitive conclusion. Especially when one considers that most of the population growth in the state has occurred on the eastern part of the state near the urban centers of Lincoln and Omaha.

       There is an additional question to answer, and this is whether or not land values will trend downward in dramatic fashion as in the 1980s. An underlying cause of the farm crisis (1981 – 1987) was the change in inflation rates, which resulted in higher interest rates. The U.S. has enjoyed relatively low inflation and interest rates since the late 1990s, which have helped support land values. However, there are indications that inflationary pressures are building in the economy and interest rates have been increasing, although at a slow pace, recently. If inflation and interest rates continue to trend upward, a downturn in land values is expected. However, the ultimate impact on the financial well-being of Nebraska agricultural producers will also depend on the level of government payments and the income derived from selling agricultural production.

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Table 1. Comparison of Average Nominal Value Farm Real Estate ($/acre) during 1950 to 2005 for the U.S., Nebraska, Corn Belt, and Northern Plains.

Table 2. Comparison of Farm Numbers and Land in Farms during 1970 to 2005 for the U.S., Nebraska, Corn Belt, and Northern Plains.

Table 3. Comparison of Rural and Urban Population Proportions, Selected Years, for the U.S., Nebraska, Corn Belt, and Northern Plains.

Table 4. Comparison of Average Net Cash Income ($/acre) and Government Payments ($/acre), Selected Time Periods, for the U.S., Nebraska, Corn Belt, and Northern Plains.

Table 5. Average Value Farm Real Estate ($/acre), Cash Rental Rates ($/acre), Net Cash Income ($/acre), and Direct Government Payments ($/acre) for Nebraska, 1991 to 2004).