The average value of U.S. pastureland rose 4.5% through the start of this year to $1,150/acre, USDA says. That’s another new nominal high, but pales against the blistering cropland market, where values swelled 14.5%.
Pasture prices are being pulled higher by a combination of low interest rates, continued conversion of grassland to row-crop production, and increased demand for pasture as a cheaper feed alternative in the face of high grain prices. In addition, record-low interest rates have expanded both the number of qualified potential buyers of land, and the price they can afford to pay.
Pasture price inflation would likely be steeper if it wasn’t for the ongoing contraction in the national beef herd. With the number of beef cows down 3% from last July, there are 900,000 fewer cows competing for grass this year – a record low since the government began collecting data in 1971.
Regionally, pasture value changes varied widely. Price movements ranged from a 22% spike in the Northern Plains and 9% in the Corn Belt, to 5% in both the Southern Plains and Mountain states regions.
Pasture prices in the Southeast, Appalachian and Pacific states continue to notch down, deflating 7%, 1.5% and 1.2%, respectively, for the 12 months through Jan. 1. Pasture parcels in the Southeast are now trading 32% under the region’s 2008 market peak. The Georgia pasture market has been hit hardest, where prices are off 44% from 2008.
Pasture price increases are strongest in the Northern Plains, where high grain prices continue to propel the value of all tillable land. In Nebraska, the country’s third biggest corn-producing state, pasture values spiked 24.5%, to an average $660/acre. This robust gain still trails the 39% rise in Nebraska cropland values, and suggests buyers may be bidding up pasture tracts that have the potential to be converted to row-crop production. Over the last decade, Nebraska’s irrigated cropland acreage has swelled 18% to 8.6 million acres.
Surveys of market conditions through this year’s first half indicate that pasture values continue to inflate at a double-digit pace. In the West Central Plains and Mountain states, pasture values rose an average 10.4% in the January-June period across Kansas, western Missouri, Nebraska, Oklahoma, Wyoming, Colorado and northern New Mexico.
Buyer demand appears strongest in the western Mountain states, where pasture tracts are trading at an estimated $441/acre, or nearly 15% above year-end 2011 levels, according to the Federal Reserve.
In the Midwest and Mid-South, pasture values range from $4,000/acre in southern Indiana to $1,567/acre in northern Mississippi, according to new quarterly survey launched in June by the Federal Reserve Bank of St. Louis.
In the North Central region, pasture values are up 11% for the 12 months through June. Prices range from $434/acre in Montana, $453 in North Dakota, $1,673 in South Dakota, $1,791 in Minnesota and $2,281 in Wisconsin, according to the Federal Reserve Bank of Minneapolis.
The fading 2011 drought in Texas is helping fuel a modest rise in ranchland values. Grass and range lands are slowly recovering and producers appear to be taking a conservative approach in rebuilding their cattle herds.
Through June, Texas ranchland values were up 5-7% from a year ago. Bankers say pasture prices range from $470/acre in the Northern High Plains to $3,461/acre in central Texas.
Sales activity remains muted. There were just 4,520 rural Texas land sales last year, down from 4,747 in 2010 and substantially under the 8,005 sales in 2005 when the market peaked, notes Charles Gilliland, Texas A&M University research economist.
In central Texas, some landowners are now receiving production payments from the Eagle Ford Shale oil and gas development. “People are bringing million-dollar checks into little country banks,” Gilliland says. “They are all looking for something to do with the money.” So far, market observers say ranch owners are investing in improvements, such as new fencing, ponds and grass plantings.