Land values increasing throughout South Dakota

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BY Katie Zerr

The value of land involved with agricultural production in South Dakota continues to grow in most parts of the state.

Between 2010 and 2011, the increase in agricultural land value of nearly 27 percent is the highest annual increase in the past 22 years according to the South Dakota State University’s Economic Commentator. These findings are a result of the South Dakota State Farm Real Estate Market Survey of 2012.

The report said between 2000 and 2010 the annual increases in all agricultural land statewide varied from just more than 5 percent to more than 22 percent. Overall the agricultural land values in the state have more than doubled since 2007 and show a five-fold increase since 2000.

The report shows that cropland values increase at a higher rate per acre than land used for other agricultural uses. (See accompaning charts.)

Cropland values increased statewide by 29 percent versus 27 percent for hay land and 20 percent for pasture and range land.

The northcentral area, in which Walworth, Campbell and Potter counties are included, were one of the three regions that showed the greatest increase.

The lowest percentage of increases in the land values were recorded in the northwest and southwest regions. Dewey and Corson counties are in the northwest region.

John Fischer, a Long Lake auctioneer who deals in agriculture land, said there are many factors in the increase in value for Ag land, but the number one reason is that there is only so much land for sale.

“There is no more land being made,” he said. “And once something is sold, it is unlikely that it will come back on the market for many years.”

Other factors that keep the prices on the increase according to Fischer are low interest rates, high commodity prices and a strong cattle market.

It is the perfect storm for the Ag land market he said.

“The bubble is getting bigger,” he said. “We are in a positive cycle but what would it take to bring this down? A drop in cattle or crop prices, a major disaster such as 9-11 or anything that impacts our economy.”

He said Ag producers are investing in the land and as long as the value continues to rise, it is good investment with a solid return.

Darrell Schlepp, chief executive officer at Dacotah Bank in Mobridge, said two major factors are involved in land investments for Ag producers.

“Farming land is their factory. The value of the land is determined by production, not just by prices,” he said. “Agriculture is a business that is getting more complicated all the time.”

He said the changes in farming techniques, the technology that is now used and the genetics involved have all buoyed production, which in turns adds value to the land.

It costs more to get a crop now, but that also boosts the value in the land,” he said. “The cost of renting land is also inching up with the increase in land value.”

From 1991 to 2012 agricultural land values increased more rapidly than the general price inflation in all regions of the state according to the SDSU survey. These factors added to low farm mortgage rates and attractive interest rates make investing in farmland favorable in today’s market.

– Katie Zerr –

 

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