By Scout Nelson
Cropland values in North Dakota have experienced a notable increase of 11.59% as spring 2024 approaches, climbing from $2,863 to $3,174 per acre, according to Bryon Parman, a North Dakota State University (NDSU) Extension agricultural finance specialist.
This marks the third consecutive year of over 10% growth in land values, following increases of 10.92% and 13.46% in 2022 and 2023, respectively. Data from the North Dakota Department of Trust Lands Annual Land Survey, adjusted by county acreage count for this analysis, reflects these changes.
Cash rental rates for cropland have also risen, though at a more moderate pace. Increases of 3.12%, 6.82%, and 3.71% were recorded in 2022, 2023, and 2024 respectively, pushing the statewide average rental rate from $75.90 to $78.70 per acre.
This adjustment brings the rent-to-value ratio to 2.48%, a figure that excludes taxes and other ownership costs from its calculation.
“The rent-to-value ratio is simply the state average cash rental rate divided by the reported average market value,” explains Parman. “What the rent-to-value ratio helps capture is the expected yearly income from land ownership relative to the purchase price.”
Significant price increases were observed particularly in the north central and south central NDSU Extension regions, both surpassing 20%. Rental rates escalated in the southwest and south-central regions, exceeding 8% growth.
Despite these positive trends, Parman notes, “A jump in land values across North Dakota that large is a bit surprising given the decline in net farm incomes from 2022 to 2023, and the U.S. Department of Agriculture’s projected decline from 2023 to 2024.” He also suggests that higher interest rates in recent years should typically drive rental rates up, yet that hasn’t been the case.
The difference between land value increases and rental rate adjustments suggests that capital appreciation remains the primary financial benefit of land ownership under the current economic conditions. Looking forward, with the likelihood of sustained high interest rates, upward pressure on rents relative to land prices is anticipated.
Photo Credit -istock-alenamozhjer
Categories: North Dakota, Business