Plains ranch lands at historical highs

Cattle Market & Farm Reports, Editorials
Dec 20, 2007
by WLJ

The eastern Plains region of the U.S. is very rich in both farms and ranches, and brokers and realtors both say the current market for those entities is nearing or has exceeded historical highs. In addition, sources said the large majority of these properties that have been sold are being kept as agricultural operations, either in part or in their entirety.
“The land market throughout the western Cornbelt and eastern Plains is very strong with most areas seeing land values at historical highs or setting new highs,” said Monty Meusch, head real estate broker with Farmers National, Omaha, NE. “Demand is being pushed by area farmers and ranchers wanting to expand their current operations, investors seeking to place cash in real estate for diversity, safety and income and IRS 1031 tax deferred exchange buyers who have sold land for development and now must re-invest the sale proceeds or pay capital gains tax.”
According to Meusch, 60-70 percent of agricultural real estate for sale is currently being bought by active farm and ranch families. “We still have a good interest from active producers who are insuring their future by expanding,” he said.
As far as “nonresident” buyers are concerned, Meusch said, “a majority of them already own land and are very comfortable in growing their holdings for a number of reasons.”
Most realtors in the region indicated that anywhere between 25-40 percent of buyers have been 1031 purchasers, who need to purchase land in order to avoid paying capital gains taxes.
Price ranges for ranch land in the region vary widely, even within states.
In Kansas, Flint Hills grassland has been primarily selling within a range of $650-1,100 per acre, while pasture land in the western part of the state sells between $200-450 per acre. According to Meusch, the upper end of the range is hit when land has more water resources and adequate-or-better fencing.
As a whole, Nebraska’s land values aren’t as high as the upper end of Kansas ranch land, but are very comparable to western Kansas prices. In the Sand Hills of Nebraska, ranch land has been selling between $250-525 per acre. In north-central Nebraska, values have reached historical highs between $500-750 per acre.
John Childears, broker at Agri Affiliates, North Platte, NE, still indicated that prices are the highest he has ever seen in his 30 years of brokering farm and ranch land. “We are looking at ranchers spending $3,500-4,000 per cow unit right now, and that is just for the land itself,” he said.
According to Meusch and Childears, demand for grassland in north-central Nebraska far exceeds availability, and that most available tracts are only “small acreages.”
Childears added that the 1031 demand for ranches in the Sand Hills is around 40 percent and that a lot of that money is coming from previous owner/operators of ranches from other areas of the country.
“We’re seeing a lot of Colorado mountain and Wyoming ranchers who sold their property over the past few years and are coming out here with that money and reinvesting it in other ranch properties,” Childears said. “We are also seeing a similar trend from farmers or ranchers from the Corn Belt that sold smaller properties for a lot of money and are coming out here and buying much more land than they had before.”
In terms of outside investors, Childears said there have been some buyers that have come in and bought ranches and converted them into recreational properties, but the percentage is still very small.
“What we have seen is that some of these investors start out with the hunting and fishing aspect of the ranch, and then start to lease out the ranch to ranchers on the off-season,” Childears said. “It’s the opposite of ranchers who raise their livestock, primarily, and then lease out their property for hunting, fishing or other recreational activities as a secondary business.”
Childears said that situation is generally seen on ranches located on or near the Platte or Niobrara rivers that run along the Sand Hills.
In the Dakotas, sources reiterated that the market for ranches and pasture land are very close to historical highs and that demand is exceeding availability.
South Dakota has the stronger land values than its neighbor to the north, but most ranch brokers have said that range and pasture land in both states is bringing over $200 per acre. The average price for pasture in South Dakota is around $250, while North Dakota averages around $205.
According to ag realtors licensed in either state, most buyers of pasture, range or a “balanced ranch” are existing livestock operators who are expanding their operations from neighboring states to the immediate south or east. Several sources indicated that 1031 money is also very prevalent in the real estate market in the Dakotas, and that most of it is going to purchase vast expanses of land in the central Plains, or mountain areas of the country.
“I would say if it wasn’t for a lot of the 1031 buyers and those that are into recreational activities, this ranch market wouldn’t be one-third of what it is now,” said Bryce Nelson, Bryce Nelson Real Estate, Rapid City, SD.
Nelson added that he sees animal unit values even higher than what they are in Nebraska and parts of Kansas.
“We have a lot of 30 to 40 acre-per-cow areas in the Dakotas, and the cheapest we have sold ranch land has been $250 per acre,” he said. “I have sold a couple of properties this year where the value is well over $10,000 per animal unit.”
In the eastern half of Colorado, pasture and rangeland values are still trying to recover after being hit by drought during the late 1990s and first few years of the 21st Century. However, those values are also said to be getting close to averaging $200 per acre now, compared to $140-175 per acre in 2002.
“Drought eliminated a lot of pasture, and cows and stocker cattle were hard to come by the past five or six years,” said Daylynn Lindstadt, ranch realtor near Rocky Ford, CO. “A lot of that land became available down here over that time, but demand was very sporadic due to no livestock being able to graze it. Now we have revived interest from cow/calf or stocker operators and the (land) market is seeing phenomenal improvement.”
The eastern Colorado market is expected to improve even more and could see a peak sometime next year, particularly if cattle herd expansion continues, he said. — Steven D. Vetter, WLJ Editor

© Crow Publications - Any reprint of WLJ stories, except for personal use,
 without permission, written consent and appropriate attribution is prohibited.

©1996-2005 Crow Publications. All rights reserved.