North Dakota cropland values remain steady in 2020
North Dakota cropland values and cash rents remain flat, says Bryon Parman, North Dakota State University Extension agricultural finance specialist.
“Despite the lower commodity prices of the last several years, the longer-term averages have been aided by low interest rates, farm programs and ad hoc payment programs designed to help farmers meet cash flow obligations,” Parman says.
Parman used data from the 2020 North Dakota Department of Trust Lands survey to determine that state average cash rents were down .5% in 2020, while land values were up slightly at 1.73%. “However, when movements that small are put into context over time, it shows North Dakota cropland values and rents are not moving,” Parman notes.
For instance, from 2017 to 2018, rents statewide were down 4.6%, then from 2018 to 2019, they were up 3.6%, then down slightly again in 2020 by .5%.
Much of that movement likely is related to the average quality of the cropland rented or negotiated in any given year and survey measurement error. When viewed regionally, much wider swings were observed in which the northwestern region appeared to have cropland rents fall 5.2% from 2017, then increase 7.38% in 2019, then fall again 6.6% in 2020. Similarly, the south-central region showed a drop of 12.25% from 2017 to 2018, then an increase of 10.3% from 2018 to 2019, then a decrease of 3.24% in 2020.
This information is useful when evaluating trends in cash rents, Parman says. For instance, the statewide average cash rental rate in 2014 was $63.17 per acre, and in 2020 it was $63.04 per acre.
Statewide, this rate peaked in 2015 at an average of $64.78 per acre, with a low of $61.10 per acre in 2018. In general, this indicates that despite some data showing minor fluctuations, statewide average cash rents have remained mostly flat during the last six years, which may surprise some, given the lower commodity prices seen in the last several years, Parman says.
Although the regional swings are much wider, they tend to paint the same picture. The northwestern, northern Red River Valley and south-central regions in North Dakota have some of the largest year-over-year swings in surveyed average cash rents. However, from 2014 to 2020, the northwestern region went from a cash rent of $34.70 to $34.50 per acre, the northern Red River Valley went from $89 to $89.70 per acre and the south-central region went from $60 to $55 per acre.
“It should be noted that the south-central region has experienced double-digit swings in three out of the last six years and 7% swings in two out of six years, and yet in the long run, is still relatively close to the rents seen in 2013 at $56 per acre,” Parman says.
With respect to land values, the North Dakota state average was $2,123 per acre in 2014 and $2,111 per acre in 2015. In 2020, the state average is $2,063 per acre.
Using the 2014 peak value, the six-year drop totals 2.8%, or a decline of negative .48% per year. However, just as with rents, regions may show large swings such as the northwestern region showing increases of 10.5% and 12.75% in 2015 and 2016, then drops of nearly 9% in 2018 and 2020. The result is a cropland value in the northwestern region of $1,051 in 2015 and a land value of $1,091 in 2020.
“From 2015 to 2020, the northern Red River Valley region experienced changes of negative 9%, negative 6% and positive 10.4%, and yet the change during that time is from $2,983 per acre to $3,056 per acre, which is surprisingly consistent over time, given the yearly reported movements,” Parman says.
Cash rents remained highest in the southern Red River Valley region, averaging nearly $127 per acre, while the southeastern and northern Red River Valley regions sit at $96.50 and $89.70, respectively.
As expected, these regions have the highest land values as well, with the southern Red River Valley at nearly $4,000 per acre, while the northern Red River Valley and southeastern regions are around $3,050 per acre.
The lowest rents for cropland occur in the northwestern and southwestern regions of North Dakota, with both regions near $37 per acre. They also have the lowest land value at $1,091 and $1,350, respectively.
Three regions — the north-central, northeastern and south-central — have rents between $52 and $56 per acre and values from approximately $1,750 to $1,850 per acre. The east-central region has a bit higher average rents and values than the previous three regions, with a 2020 cash rent of nearly $69 per acre and land value of approximately $2,080 per acre.