The recent agricultural Land Values report from the USDA shows a curious trend since 2014; prices have been relatively flat.
Since 2014, the non-food inflation rate has been roughly 3.4 percent. Yet during that time, the national average total farm real estate value (the collective value of lands and buildings) have increased only 4.4 percent from $2,950 per acre to $3,080 per acre. Cropland value actually fell slightly over that time—from $4,100 per acre to $4,090 per acre—and national average pasture values have only grown $50 over the four years, from $1,300 per acre to $1,350 per acre.
When it comes specifically to pasture values, things have been especially flat. In the western regions (Pacific, Mountain, Northern Plains, and Southern Plains), recent growth in values have been small, and raw values are comparatively low.
For example, prices increased 0.6 percent in the Pacific region, amounting to only $10 per acre for a total $1,650, between 2016 and 2017. Similarly, the oneyear changes for the other regions were also small; Mountain up 1.3 percent (up $8 to $625); Northern Plains up 2 percent (up $20 to $1,040); and Southern Plains up 2.5 percent (up $40 to $1,620).
On the eastern half of the country, pasture values increased even more slowly from the last year, with most one-year increases being less than 1 percent. The exception was the Delta region, which saw values increase 2.9 percent, up $70 to $2,480 per acre. The Southeast region saw the highest overall pasture values in the country at $3,910 per acre.
This leveling off of the pasture values could have a variety of causes. Unlike the more dynamic general farm real estate value and cropland value, national pasture values did not see as dramatic a value gain following the 2008 recession.
The country has suffered several severe and widespread periods of drought since then, however. Many of the most severe drought periods hit before the pasture value plateau. These events have had impacts on the quality—and almost certainly the value—of pasture land, particularly in the West.
As of last week, 47 percent of the country’s pasture and range were rated as good or excellent. While this sounds good, some historical context is valuable.
“Current conditions still are above that 10-year average but, as with corn, one needs to recognize that the long run average includes that disastrous 2012 year when good/excellent rating dropped to under 20 percent,” noted the CME Daily Livestock Report. “Current pasture rating is the worst since 2013.”
The CME Daily Livestock Report also predicted continuing decline in pasture quality as the summer progresses. This seems likely, based on temperature and precipitation forecasts from the National Weather Service. Temperatures through November are expected to be higher than average across the country. Precipitation expectations are for higher than average rainfall in the South, and average across the rest of the country.
Drought conditions in the Northern Plains are expected to persist and likely expand through the end of November. Currently 13 percent of the nation’s cattle herd, 12 percent of the nation’s sheep flock, and 27 percent of the nation’s alfalfa hay production are directly impacted by drought.
“Deteriorating pasture conditions and deteriorating profit outlook could continue to put pressure on cow-calf operators, pushing calves to market earlier than expected and, in some cases, forcing producers to change their plans about expanding the beef cow herd. Low feed costs and ample hay supplies have bolstered calf supplies in the last three years.
But much as we would like that to be the case, weather patterns turn and invariably this directly impacts cattle production,” commented the CME Daily Livestock Report.
