Continued low interest rates, robust price increases for row-crop land and strong cattle prices are nudging up pasture values.
The average value of pastureland rose nearly 2% through the start of this year to $1,100/acre, according to USDA. That’s double last year’s pace of 1%, and $10/acre above the 2008 nominal market peak. Interestingly, pasture values advanced despite fewer cattle competing for grass: The number of beef cows is down another 1% this year, and ranchers are also holding 5% fewer beef replacement heifers.
Photo by Lauren Chase, Montana Stockgrowers Association
Regionally, pasture prices increased 6-7% across the Corn Belt and Northern and Southern Plains. Pasture prices in the Southeast continue to contract, deflating 8.4% for the 12 months through Jan. 1, and 27% under the region’s 2008 market peak.
Corn Belt tops the list
Pasture price increases are strongest in the Corn Belt, where high grain prices have lifted the value of all tillable land. In Iowa, the country’s top corn-producing state, pasture values spiked 26%, to an average $2,650/acre. This gain exceeds the 24% rise in Iowa cropland values and suggests buyers may be bidding up pasture tracts for conversion to row-crops. Some pasture conversions occurred when land prices jumped in 2007-2008, says Iowa State University economist Mike Duffy. But, so far, Duffy isn’t aware of another pick-up in conversions.
Surveys of market conditions indicate pasture values continue to edge up in the second quarter, though at a slower pace than in the first quarter. In the West Central Plains and Mountain States, pasture values rose an average of 1% in the second quarter across Kansas, western Missouri, Nebraska, Oklahoma, Wyoming, Colorado and northern New Mexico.
For the 12 months through June, buyer demand appears strongest in Nebraska, where pasture tracts are trading nearly 17% above year-ago levels, compared to an average 11% across the region, according to the Federal Reserve.
The severe drought in the Southern Plains is putting pressure on the ranchland market – especially in Texas where poor pasture conditions have hastened herd liquidations. Texas ranchland prices eased 2.3% in the second quarter to an average of $1,716/acre, according to the Federal Reserve. Texas ranchland values are off about 1% from a year ago, bankers say.
Market participants report very little demand for both recreational and cattle ranch properties. “Things are really slow unless you have a sizeable place that appeals to high net-worth individuals who are parking money,” reports Chad Dugger, with Charles S. Middleton and Son, a ranch brokerage and appraisal firm in Lubbock, TX.
Ranchers began thinning cattle herds at the end of last year, with many herds culled to bare minimums to preserve rangeland and manage dwindling stock water supplies, says John Taylor, national farm and ranch manager for US Trust/Bank of America in Dallas.
With rangeland exhausted, ranchers are trucking in alfalfa hay from irrigated growers in New Mexico and up into Colorado, Nebraska and Kansas. Hay prices have tripled from a year ago to $300/ton.