NORTH DAKOTA F~RMLAND VALUES AND RENTALS

Jerome E. Johnson

Changes in farmland values since the "Russian grain deal" in 1972 have greatly impacted agriculture and related industries. The average annual rate of increase in farmland values in the United States during the period 1945-72 was 5.9 percent (Table 1). Farmland values rose at an average rate of 15.4 percent from 1972 to 1981. During this period some farmers were encouraged to ex­pand their farm sizes because they expected farm com­modity prices and values to rise. However, land values decreased by an average annual rate of 2.4 percent from 1981 to 1984. Some farmers who expanded their opera­tions have seen interest rates on their farm loans rise dramatically, even to threaten their ownership of land and the continuation of their farming careers.

This article presents information on farmland values since 1945, based on both U.S . Department of Agricul­ture and U.S. Census of Agriculture data . It continues with an updating of the more detailed NDSU annual series of farmland values for eight farming areas of the state. A final section contains information on gross cash rents for the past 24 years in North Dakota .

Three sources of data were used. The U.S. Depart­ment of Agriculture (USDA) and North Dakota State University (NDSU) each annually survey knowledgeable people about farmland values, mailing annual surveys to farm real estate brokers, bank agricultural represen­tatives, some attorneys, and other informed people. The NDSU study also surveys county supervisors of the Farmers Home Administration . The U .S. Census of Ag­riculture, the third source of data. is taken about every five years. The U.S. Bureau of Census asks each farm operator to report the value of the land and buildings within that farm operating unit. Respondents may be full owners, owners who are also renting land (called partowners), and full tenants. These individuals value their own and any farmland they rent.

Only the USDA and NDSU surveys provide annual estimates of farmland values. The USDA study reports

Johnson is a professor of Agricultural Economics. The diagrams initially were prepared by Harvey Vreugdenhil, research associate in Agri­cultural Economics; and further treated by Ms. Carol VavRosky, data clerk in Agricultural Economics.

one statewide figure for each state. The NDSU estimates are calculated for eight farming areas of the state. Since neither study gives annual value estimates by counties, the only source of county value data is the periodic U.S. Census of Agriculture.

Farmland values and gross rents are reported as dollars per acre. Dollar figures are in nominal terms, meaning the dollars per acre are for the years indicated. Since inflation has caused the value of the dollar to fall in most years, all numbers presented in the diagrams have been adjusted to measure values in 1983 dollars. This is called inflating the earlier "nominal" dollar numbers, creating "real" or constant (in terms of pur­chasing power) dollars per aCre values.

A Long View for the U.S. and Selected States

Farmland values in nominal or "current dollar" terms for the United States increased from $47 per acre in 1945 to a high of $795 in 1981, and then declined to an estimated average of $739 per acre on April 1, 1984 (see Table 1). Some states exhibited earlier rises in value than the national trend, and some have increases that continued after the national average declined.

The average value of North Dakota farmland was estimated at $19 per acre in 1945 and slowly rose to $98 in 1972. The increase reported for 1972 to 1973 was $10 per acre. But the average rose by $36 an acre in 1974, with rapid increases through 1981, a small rise in 1982, followed by declines to the present.

USDA estimates for neighboring states also are presented in Table 1. The data for Minnesota exhibit relatively small increases each year until 1973, and then large increases through 1981, followed by declines for 1982 through 1984. The USDA reported the same dollar values for North and South Dakota for 1945, with a slightly higher estimate in South Dakota each year up to 1957 when its dollar increases became smaller than those for North Dakota. Values peaked in South Dakota in 1982, after only a small increase from 1981. Montana is the only neighboring state for which the USDA reported an increase from 1983 to 1984, but the overall pattern from 1945 is similar to those of South Dakota and Wyoming. Real estate values for Wyoming showed a doubling from 1946 to 1960. small annual increases through 1972, and then moderately up through 1982.

25

Table 1. Farm real estate values: average value per acre of land and buildings, U.S.·48 states, and North Dakota and selected neighboring states, Feb. 1, 1976·81, and April 1, 1982·84.

U.S.·48 NORTH SOUTH YEAR STATES DAKOTA MINNESOTA DAKOTA MONTANA WYOMING

...................................................... ······do liars per ac re .... · .... ········· ................ ·· .. ···.·.········ ....... . 1945 47 19 ' 58 19 12 9 1946 53 21 65 21 13 11 1947 60 23 72 24 15 12 1948 64 28 79 29 17 14 1949 66 30 82 31 18 14 1950 65 29 84 31 17 13 1951 75 31 98 36 21 15 1952 82 36 107 41 23 17 1953 83 37 109 40 24 16 1954 82 36 104 38 24 16 1955 85 36 109 40 25 15 1956 91 38 119 40 27 16 1957 97 42 129 42 28 17 1958 103 46 143 46 30 19 1959 111 51 153 51 33 21 1960 116 53 155 51 35 22 1961 118 55 150 52 36 23 1962 124 57 156 55 38 25 1963 130 60 158 59 39 26 1964 138 64 162 62 41 27 1965 146 67 167 62 42 28 1966 158 73 176 69 47 31 1967 168 78 188 71 50 33 1968 179 81 201 80 54 36 1969 188 91 216 83 56 38 1970 196 94 226 84 60 41 1971 203 95 231 85 63 42 1972 219 98 241 87 68 48 1973 246 108 269 94 76 55 1974 302 144 338 119 96 70 1975 340 195 429 145 112 80 1976 397 236 529 163 134 98 1977 474 247 672 194 157 110 1978 531 300 761 227 176 121 1979 628 347 901 256 196 144 1980 725 399 1061 273 229 153 1981 795 423 1231 290 239 164 1982 789 436 1197 291 254 170 1983 744 414 1065 271 236 162 1984 739 414 990 263 241 165

SOURCE: U.S. Department of Agriculture, Economic Research Service, FARM REAL ESTATE MARKET DEVELOPMENTS, various issues.

Figure I shows trends in two of several indices used to measure changes in the purchasing power of the U.S. dollar. The Consumer Price Index (CPI) has several Figure 2).

changes in the prices of consumer foods. The Producer Price Index for Farm Products also is an appropriate in· dex to use to measure changes in the wholesale prices of farm products. The CPl/All Foods (1983 = 1(0) was

purchase about 17.4 cents of food compared to the 1945

buy what the 1945 dollar bought. Land values are con­verted from nominal (current) dollars to a constant base by dividing the estimated value for each year by the in­dex value for that year. The adjusted values per acre

components. The "All Foods" component reflects

0.1738 in 1945, indicating that the 1983 dollar could 1983 are inflated to reflect the lower purchasing power

dollar. Conversely, it would take about $5.80 in 1983 to

result in comparable "real" land values for the years of 1945 to 1984 that are measured in 1983 dollars I (see

The results of dividing the estimated farmland values per acre by Consumer Price Index for All Foods are presented in Figure 2. Since the 1983 dollar buys less than the 1945 dollar would have, land values prior to

of the 1983 dollar.

The USDA estimated farmland value for the U.S. was $47 in 1945. The CPIIAlI Foods Index was 17.38 in

'(The annual CPI for All Foods Value for 1984 will no! be available until early in 1985. and thus could no! be used here).

26

Index Number

110

100

90

80

70

60

50

10LLLLuwuu~~~~~LLLLLLLWUUUU~~~~ '45 '50 '55 '60 '65

Years

Figure 1. Consumer Price Index for all foods and Pro· ducer Price Index for farm products, (1983 =100).

1945 (1983 = 1(0). The 1945 real dollar estimate in 1983 dollars equals 47 divided by 0.1738, or $270. The reported figure for each year was similarly adjusted to 1983 dollar terms, resulting in the values plotted in Figure 2. The numbers reported for each state also were converted in the same way to reflect their values in terms of the 1983 dollar.

Rapidly rising inflation during 1946-48 resulted in declining real U.S. land values. The average real value of U.S. farmland rose quite moderately each year from the adjusted value of $270 in 1945 to $508 in 1973. Real value rapidly increased from 1973 through 1981. More recently real land values have declined.

The USDA reported an average nominal value of $58 an acre in 1945 for Minnesota farmland, which became $334 in real doUars. Real land values in Minnesota in­creased faster than the national average from 1950 to 1969, and much faster from 1975 to 1981.

For North Dakota, the nominal value of $19 an acre in 1945 translated into $109 in real terms. Real land values rose to a high of $244 in 1969, then declined some before rising rapidly from 1975 through 1980 (see Figure 2).

Graphed real land values for South Dakota display a pattern similar to that of North Dakota, but not fluc­tuating as much. Graphed Montana real values show a relatively smooth and generally rising line from 1947 through 1980. Real land values for Wyoming display a slowly rising but fluctuating line from 1945 through 1982, without a sharp increase in the late 1970s.

27

Do 11 a rs Per Ac re

1 )00

1200

1100

1000

900

BOO

700

600

500

400

300

200

}OO

Years

Minne so ta

United States

North Dakota

South Da kota Montana

Wyoming

Figure 2. Average farmland values adjusted by the Con· sumer Price Index for all foods, (1983 =100) for U.S. and selected states (adjusted USDA values).

The USDA estimates, when adjusted for changes in the purchasing power of the consumer dollar (CPI!All Foods), show that realJand values for the United States had gone up about 3.2 fold from 1945 to 1983, rather than the 15.7 fold that the nominal figures suggest. The adjusted numbers also show that the more productive land (Minnesota) has increased more in value than states with more pasture or rangeland.

Census Land Values

Changes in farmland values in the eight farming areas of North Dakota were obtained by weighting the county average value for land and buildings per acre reported by the U.S. Census of Agriculture. The eight farming areas represent the types of farming in North Dakota . This discussion of Census of Agriculture values by farming areas provides a setting for the next section on

annual estimates of farmland developed by the NDSU surveys.

The U.S. Bureua of Census sends questionnaires to· farm operators every four or five years, and includes a question on the value of the land and buildings within their operating unit. The Census receives a high response rate and publishes an average county value per acre. County averages were weighted by areas of land in farms in each county to develop weighted average farm­ing area values per acre. Area averages are presented in Figure 3.

Census values ranged from $12.10 to $37.09 an acre for 1945. Area averages slowly increased through 1969 and then rose rapidly. The state average increased $101 an acre or 106 percent from 1969 to 1974. The increase from 1974 to 1978 was $195 an acre or 78 percent. The land value change for 1978 to 1982 was $93 an acre or an increase of 27 percent.

A careful examination of the averages by farming areas across the census years shows a dichotomy of western and eastern North Dakota. The two northern farming areas in the western half have higher average values per acre than their southern counterparts. The eastern half of the state displays the opposite pattern, where land values in its two southern areas average more per acre than in the northern farming areas.

The spread of average values per acre by farming areas has increased over time. The South Red River Valley average value of $37.09 is 3.1 times that 0 f the

1982, S310.66 1978, S248.53 1974: S14O.50 1969: S 65.4lI 1964, S 45.65 1959: S 38.36 1954: S 28.08 1950: S 20.71 1945: S 12.10

1982 $417.75 1978 $329.09 1974 S190.22 1969 S 96.87 1964 S 66.76 1959 S 50.94 19'>4 S 34.31 1950 S 26.39 1945 S 16.41

!.~ L ...\-~ \

Sout hwest farming area average in 1945. This multiple increased to 3.85 in 1982 where the South Red River Valley had an average value of $1016 and the Southwest farming area averaged $264 an acre.

All values in Figure 3 were adjusted by the ap­propriate CPl/All Foods Index and then plotted in Figure 4. The average nominal value of land in North Dakota increased from $17.28 in 1945 to $440 an acre in 1982. This is an increase of $423 an acre or a 24 fold in­crease in nominal dollar terms. The average real land value in 1983 dollars was $99 for 1945. This represents a real dollar change of $350 an acre, or a 3.5 fold increase when measured in dollars of comparable purchasing power. The land component of real wealth of land­ow'ners has increased 3.5 times from 1945 to 1982 according to adjusted Census of Agriculture values.

Value estimates expressed in constant dollars by farming areas reveal that real land values have increased by 4.2 fold for the Southeast Central farming area and 3.8 fold in the South Red River Valley farming area. The lowest increase in real terms was in the Southwest farming area where the increase was 2.9 fold.

NDSU Farming Area Averages

Estimated average farmland values obtained from an­nual NDSU surveys are shown in Figure 5 for the eight farming areas. Responses from earlier years were recod­ed and area estimates calculated back to 1974 for this report. The series contains a uniform series of estimated

1982, $507.38 .1978: $416.10 1974, $221.98 1969: S113.57 1964: $ 79.88 1959: S 55.21 1954: S 38.46 1950: $ 30.72 1945: S 19.17

.... 0IllT .... '5T C£Nnh.L

S823.17 S596.02 S328.07 S162.38 S131. 72 $110.17 S 72.36 S 58.92 $ 34.62

sun AVERAGE:

1982: S44O.00 1978, S347.00 1974: S195.00 1969: $ 94.00 1964, S 66.78 1959: S 51.36 1954, S J5. 78 1950: S 28.26 1945, S 17.28

1982, 1978 : 1974 : 1969 : 1964: 1959: 19'>4 , 1950: 1945:

S263.84 S203.28 S126.28 S 63.80 $ 47.57 S J6.42 S 24.71 S 20.80 S 12.11

l \

1982: S328.18 1978 : S285.80 1974: S161.02 1969, S 79.12 1964: $ 50.53 1959 : S 38.4lI 19'>4 : S 25.43 1950: $ 21. 66 1945 : $ 13.12

1982, $1016.26 1978 : S 756.41 1974: $ 377.50 1969: $ 193.16 1964: $ 141.12 1959: S 107.59

-.~ 1954: S 79.17 1950: $ 61.00

: .. n .., 1945: $ 37.09

1982: S522.66 1978 : $401. 83 1974: S242.74 1969: S101. 25 1964, S 72.19 1959: S 52.80 19'>4: $ 36.90 1950: $ 29.83 1945: $ 17.98

Figure 3. Calculated average farmland values for 8 farm ing areas, North Dakota, based on U.S. Census values.

28

Dollar. Per Acn

1 . 100

1.000

900

800

700

<600

I

/----'...400

)00

200

1945 1950 1954 1959 1964 1969

I I

I I

I

I I

,,,,

r,,,,,,,

5IUV

-­ _ P/llRV

~-_SII

1974 1978 1982

Figure 4. Calculated census average farmland values for 8 farming areas, adjusted by the Consumer Price Index for all foods (1983 = 100).

1983 : 5290 1983 1982 : 5299 1982 1981 : 5)00 1981 1980: 528 5 1980 1979 ; 5245 1979 1978 : $210 1978 1977 : 5204 1977 1976 : $200 1976 1975 : 5175 1975 1974 : 5136 1974

SlAn: AVERAGE :

1983 : 5420 1982 : 5434 1981 : 5454 1980: $433 1979; 5415 1978 : $365 1977 : 5DO i -"'­1976: 5325 SOUnlW(ST

1975: $285 '1"-' '---l 1974: $205 1-·..•••

l 1983; S271 1982: S264 1981 : S278 1980; $274 1979 : S265 1978 : S2J7 1977 : $227 1976 : $230 1975 : $200 1974 : $151

$374 5J55 5355 5355 $338 $291 $280 $26Q 5235 5183

average values per acre for average quality farmland, crop land, and pastureland for the eight farming areas of the state from 1974 to 1983 .

Computed farming area annual averages for crop and pastureland for 1974 to 1983 are presented in Tables 2 and 3. There is very little rasturcland in the two Red River Valley farming areas. those averages are reported to maintain the data series but should be interpreted with caution .

Land Values and Gross Rents

The U.S. Department of Agriculture provides annua l dollar estimates for the state of North Dakota on the value 'of average quality farmland and dollars of gross cash rents for rented whole farm s, rented cropland, and rented pastureland. Estimates for the period of 1960 to April I, 1984 are presented in Figure 6 .

Figure 6 illustrates the relationship of North Dakota farmland values to gross cash rents . Farmland values have increased greatly s ince 1973, while rents have not ri sen as much. Figure 7 was prepared to better show how much rents have changed in recent years. Cropland rents were relatively unchanged from 1967 to 1973, in ­creased from 1973 to 1976, and plateaued for three years before slowly rising again. Cash rents for whole farms and pastureland were depressed for the 1972-73 and 1977-78 periods. Pastureland rentals have risen by sma ll increments over the entire period shown. The rent­

1983: 1982 : 1981 : 1980 : 1979 : 1978 : 1977 : 1976: 1975 : 1974 :

i-"­

1983 : $)08 1982 : $315 1981 : $315 1980 : $303 1979: S295 1978; $273 1977 ; $245 1976 : Sl.50 1975 : 5200 1974: $165

$485 $534 $615 $533 $519 $410 $365 $345 $290 $203

1983 : 1982: 1981 : 1980 : 1979 ; 1978: 1977 : 1976 : 1975 : 1974:

..,..­

$472 S497 $540 $519 $440 S396 5358 5350 $320 $266

583 1 58 55 5815 580) $765 56 18 5578 S568 5558 5394

1983 : 5 997 1982 : $1 .062 1981: 51.135 1980 : 51.067 1979 : 51 . 001 1978 : 5 811 1977: $ 665 1976 ; $ 640 1975 ; $ 535 1974 ; 5 377

Figure 5. Annual estimated average farmland values for 8 farming areas, 1974 to 1983 (NDSU surveys).

29

Table 2. Estimated average value of cropland per acre by eight farming areas of North Dakota, 1974 to 1983.

Farming Area

Northwest Southwest N W Cent S W Cent N E Cent S E Cent North RRV South RRV State ND

November 1st of: 1974 1975 1976 1977· 1978 1979 1980 1981 1982 1983

...................................................... ·····;d 0 II ars pe r ac re···················································· ....... . 200 230 240 247 262 316 334 390 362 337 170 250 280 255 298 331 328 322 309 313 224 314 336 350 384 440 435 465 429 467 175 215 260 275 327 339 353 367 371 364 284 359 392 447 472 615 642 702 582 568 292 346 410 403 467 503 570 610 577 559 474 546 590 633 673 886 985 1050 1019 950 505 594 693 793 835 1021 1100 1245 1116 1100 250 331 375 380 420 490 503 533 498 489

SOURCE: Annual NDSU surveys.

Table 3. Estimated average value of pastureland per acre by eight farming areas of North Dakota, 1974 to 1983.

Farming Area

Northwest Southwest N W Cent S W Cent N E Cent S E Cent North RRV South RRV State ND

November 1st of: 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983

............................................................dolla r s per a ere· .......................................................... . 75 81 111 114 145 140 141 170 164 142

110 115 145 143 159 172 179 175 157 156 93 137 150 169 169 179 192 189 188 190

114 175 179 173 194 207 201 204 205 184 135 140 246 250 207 264 290 244 251 172 159 193 210 182 205 241 254 262 233 214 135 189 193 199 236 288 298 242 212 243 176 231 242 249 295 377 485 400 400 364 120 160 180 182 191 221 228 217 208 191

SOURCE: Annual NDSU surveys.

Dollars Per Acre Do llars 'ar Ac:rtI

450

400

]50

]00

250

200

1 50

100

50 crOPl an~ See as

p."cureland inb~~;~~=';::~Wh;OI~e~F~.m§.~=~~~~~(xpandedo Figure 7

1960 1965 1970 1975 1980 1985 Year.

Figure 6. Estimated value of North Dakota farmland, and gross cash rents for rented whole farms, cropland, and pastureland (USDA Data) ..

30 .

35

30

25

20

15

10

1960 1964 1968 1976 1980 19114

Figure 7. Gross cash rents for rented whole farms, cropland, and pastureland, North Dakota (USDA Data).

al figures for rented cropland and rented whole farms follow very similar patterns for the last 10 years.

Adjusting gross cash rents from nominal to constant dollar terms, using the CPU All Foods Index

Continued on page 34

Table 9. Production and Value 01 Dry Edible Beans, North Dakota, 1974·1983.

Yield Season Va lue Per Ac res Per Acre Average Harves ted

Yaar Harvested HaNes ted Production Pr ice Acre

(000) lCWI) (000 Cwl.) IDol.ICw!.) IDolS/A I 1974 102 6.5 663 23 90 15535 1975 122 9 .7 1. 183 14.70 14254 1976 139 80 1,112 11 20 89 60 1977 105 105 1. 103 1580 16597 1978 113 11.0 1.243 13 50 14850 1979 105 13 5 1.4 18 22 50 30386 1980 255 10 5 2,678 24 .70 25940 196 1 415 11 0 4,565 1980 217.78 1982 240 105 2.520 11 30 11865 1983 160 10 3 1,648 20.1 0 ((1 7 03

SOURC S1al1stlcal Reporting Se'" Ce, USDA. Fa '90, NO.

Oats

Oats conti nues to be a major crop even though it ranks near the bottom as a sou rce o f inco me from pri n­ci pal crops beca use a significant amou nt of oats prod uc­tion i fed to livestock ins tead of bei ng mar keted as a cash crop. Oat. produc tion peaked in 1969 with 153.6 mill ion bu hel from 2.7 million acr s. The relatively low prod uction in 1980 occurred bee use drought reduced harvested acres to 450,000 out of over I million acres planted. Yield s wer also low due to the drought (T ble 10).

Continued from page 30

1983 =100), permits compa rison of real rents pa id over time. The adjusted val ue are plotted in Figure 8.

A ra pid inc rease in innation in 1973 as measured by th e CPI/All Foods Index is apparent in Figur 8, The decli nes in real rentals for 1973 were furt her reduced by this spurt in the CPI/ All Foods Index. Real gro. s cas h rentals for bot h crop land and rented whole farms peaked in 1976 after ri sin g from the low repo rt ed for 197 3. G ross cash rental hav e fu rther decli ned in real terms ince 1978. Another way lO study th is relat ion hip would be to examine the ratio of gross cash rentals to the est ima ted market value of th t rented la nd . How­ever, th is ratio Ouct uates due to variations in bot h the gro s rents and th e es ti mates of market value of ren ted land.

In summary, thi article has pre en ted in f rmation on farmland v lu es and rentals fo r North Dakota fr om several s urces, The data show considerable consi tC'n ­cy , although obtained by different methods and from diffe rent reponers. Present ing the num bers in terms of rea l dollars permits com par ison of alues over time,

hile accoun tin g for th e effe ts of in nalion on the pur­chasing power of the mea uring too l ­ the U.S. do lla r.

34

Table 10. Production and Value of Oals, North Dakota, 1974·1983. ----­Yield Season Value Per

Acres Per Acre Average Harves ted Vel' Ha",e'lad Harve s ted Produc tion Price Acre

1000) IBu.} 1000 Bu .} IDol5.1Bu I IDoIS./AC } 1974 1.400 31.5 44,1 00 1 4 1 44.4 2 975 1,370 410 56,1 70 1.32 . 12

1976 I 180 38.0 44,840 1 J7 52 06 1977 1.500 40 .0 60,000 94 37.80 1978 1160 54 0 62,640 100 .00 1979 40 440 J ,960 I 16 51 04 1980 450 30.0 13.500 1 77 53 10 1981 960 46.0 44,160 1 63 74.98 1982 1, 150 540 62,100 120 64 80 1963 1,2tiO 50.5 63,630 1 35 sa 18

SOURCE: Slal lSlI t RepOf In S<l"',ce. USDA, Fargo. NO.

Goxernment Payments

The level of farm program payments to fa rm ers in North Dakota has var ied signi fica ntly wi th peaks and valley in agricu lt ural income (Fi ure 1). During the mid­dle and late 1930 , far m program payments averaged 17 percen t o f total agricultu ral cash receipts. They averaged only 2.5 percent during the more prosperous 1950s . Dur ing 1974, 1975, and 1976 farm program payments we re 1.3 percent o f to tal agricultural income but had increased to 8 percent with the Payment-in ­Kind Program in 1983. The mo ·t important generator o f ca h recei pts wa th e Wheat P rogram, fo llowed by the Feed Grai n P rogram, Con ervation , ugar Ac t, Woo l Act, Mil k Indemn ity P rogram, Bee Keepers In­demn it y Progra m, and oth er miscell aneous programs,

Dollar. Per Acr-e

40

)5

) 0

25

20

15

10 Pas tl..1r eland-c.

5

o '60 ' 65 '15 '80 ' 8)

Figure 8. Gross cash rents for rented whole farms, cropland and pastureland adjusted by the Consumer Price Index for all foods, (1983 =100), North Dakota (ad· justed USDA data).