Ag land values in SD fall for first time in 25 years

Farm Forum

Lee Rude had hoped for a better per-acre price for his family’s pasture land in southern Butte County that sold at auction in October.

The land brought $1,126 an acre, about $290 above the per-acre average price for land in northwest South Dakota this past year.

But Lee, who was overseeing the sale of land owned by his dad, Maynard Rude, said an earlier sale in the area had led them to believe their land might fetch $1,500 to $1,600 an acre or more.

Still, agricultural land prices are in good shape in northwestern South Dakota, relative to the downtown trend in much of the rest of the state.

The per-acre land value in far northwestern South Dakota, which increased by 14.2 percent in a year, is bucking the trend for ag land values in the rest of the state, which are down on average 2.4 percent from 2015. This is the first time in at least a quarter-century that statewide ag land values have dropped.

Rude said the volatile cattle market had potential buyers on edge.

“They’re more than a little skittish right now,” Rude said. “Since we listed for sale in mid-August a lot has changed awful fast. People who’ve got money to invest, they’ve gotten nervous.”

Ranchers and other livestock market experts said prices for calves coming off pasture in the fall are down at least 40 percent from two years ago.

“It was a respectable sale, but frankly I think we could have done a little bit better,” said Martin Jurisch, whose auction company sold the Rude land.

Jurisch, too, believes a dip in livestock prices has producers tightening the purse strings.

Cautious buyers are reflecting the caution of their bankers, Jurisch said.

“Because they don’t know what the marketplace is going to do, the bankers are tightening up on what they believe some of these land values are,” he said. “You are seeing some caution in the banks, no question.”

Chad Pelster, commercial/ag loan officer at First Interstate Bank in Belle Fourche, said it’s the responsibility of the bank to make sure the producer pays a land price that reflects the fact that calves are bringing just $650 a head at the sale barn.

Jurisch said he doesn’t believe banks are shutting down lending on ag land, but have backed off from the amount of lending they were doing five or six years ago.

“The banks are redefining what they internally value ag land at,” he said.

In general, ag land between Brookings and Sioux Falls still draws seven times the sale price of ag land between Buffalo and Belle Fourche.

Jurisch said the increase in northwest South Dakota reflects ag land sales to out-of-area retirees whose stocks and bonds have matured and instead of paying taxes to the government, they invest in land.

“I’ve seen some individuals from Minnesota and eastern South Dakota who find themselves in that predicament. Rather than just give it to the government, they feel better about having that asset be land rather than stocks,” he said.

A report from South Dakota State University said the average per-acre value of land dropped from $2,505 in 2015 to $2,444 in 2016 after averaging a 10 percent increase annually since at least 1991, when the university began its survey of experts across the state.

Lands are divided into two categories, non-irrigated and irrigated.

Non-irrigated, or dryland, makes up 99 percent of the acres used for crops and livestock pasture and hay, and 1 percent of the land is made up of irrigated, or wetlands.

The land’s worth reflects the sharp declines in crop and beef cattle prices.

According to farmers, prices for corn, soybeans and wheat are down at least 30 percent from historic highs seen three and four years ago.

Usually the prices for livestock and crops counter each other. However, in the past five years prices for both have risen and dropped together.