NDSU Extension - Mercer County

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N.D. Pastureland Values Decline in 2020

land values, rent, pastureland values, cash rents

Submitted by Craig Askim, Extension Agent/Agriculture and Natural Resources

This time of year, I start receiving many calls on land values and rents. This article explains the differences in pastureland values and rents from 2019 to 2020. In Mercer County, pastureland values actually increased by $106 per acre from 2019 to 2020 or 11.9 percent. The rental rates decreased by $1.10 per acre from 2019 to 2020 or 6.0 percent. Prime pastureland in the county is still in high demand and short on supply as far as purchasing options.

Pastureland rent rates is the second highest cost of production in many ranching operations, after feeding costs. Communication throughout the whole year between landowners and renters is the greatest management plan both parties can have when working on rental contracts. – Craig

Statewide pastureland values and rents are down in 2020, after peaking in 2019, says Bryon Parman, North Dakota State University Extension agricultural finance specialist. There appears to be some weakness in cash rents and land values for pastureland in North Dakota.

Parman used data in the County Rents and Prices Annual Survey, funded by the North Dakota Department of Land Trusts, to develop the weighted NDSU regional averages. Statewide, the average cash rental rate for pastureland is down approximately 5.1%, while pastureland values were down nearly 3%.

Parman notes, "Of the nine identified regions across North Dakota, three are not included in this report as pasture rental and sales data is sparse in the northeastern, northern Red River Valley and southern Red River Valley regions.

Cash rents are down across all regions of North Dakota from 2019 to 2020. The largest drops are in the northwestern region falling 8.2%, the south-central region falling 8.7% and the southeastern region falling 7.6%.

The north-central, southwestern and east-central regions experienced cash rental declines between 1 to 2%, for a statewide average decline of nearly 5%. The most expensive pastureland rental rates continue to be in the southeastern region at $31.70 per acre or $44.65 per Animal Unit Month (AUM), while the least expensive is the northwestern region at $11.1 per acre or $16.82 per AUM.

"Regionally, pastureland values across North Dakota were more mixed," says Parman."While the statewide average did decline nearly 3%, some regions show modest increases while others declined, in some cases dramatically."

Two NDSU regions increased modestly in value from 2019 to 2020 including the south-central region and southeastern region. The south-central region increased approximately 1.1% from $1,042 per acre to $1,054 per acre, while the southeastern region increased from $1,437 per acre to $1,489 per acre or approximately 3.6%.

The two largest declines in pastureland values occurred in the northwestern region and east-central region. The northwestern region fell from $630 per acre to $552 per acre or a decline of 12.4% while the east-central region fell from a high in 2019 of $1,052 per acre to $948 per acre or a drop of 9.9%.

 More modest declines occurred in the southwestern region falling from $927 per acre to $881 per acre which is a decline of almost 5% while the north-central region fell 1.1% from $805 per acre to $796 per acre. These figures work out to a weighted average decline statewide of approximately 3%.

"The 2020 Department of Trust Lands survey was conducted before the effects the COVID-19 crisis had a chance to be felt across the livestock industry," says Parman. "Livestock markets have moved dramatically lower in recent weeks and should they persist well below 2019 prices for much of the year, it will likely have an impact on pastureland prices and rents heading into 2021."

Parman concludes, "Also of note will be any government assistance provided to livestock producers, which may help prop-up net incomes during the year. In essence, the drop-in pastureland values and rents across North Dakota seen from 2019 to 2020 could continue downward as livestock producers grapple with low prices and uncertainty."

Source: Bryon Parman, 701-231-8248, bryon.parman@ndsu.edu

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