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By Bill Hord
WORLD-HERALD BUREAU

LINCOLN -- Farmland values in Nebraska increased 23 percent from 2007 to 2008, the largest jump in the 30 years that the University of Nebraska-Lincoln has conducted the annual survey.

"The underlying causes of this new plateau are fairly obvious,'' said UNL economist Bruce Johnson, who coordinates the survey of business and government leaders who specialize in agriculture land dealings.

"Corn demand from the rapidly growing ethanol industry in the state fueled prosperous returns across the corn-producing areas of the state,'' he said.

Agriculture land was valued at an average of $1,425 per acre as of Feb. 1, 2008, according to the survey, compared with $1,155 a year earlier.

Results of a similar survey in Iowa showed that farmland values increased about 18 percent in the last year.

The Iowa survey, conducted by the Realtors Land Institute, found that high-quality farmland was selling for an average of $5,223 per acre in March 2008. That's up 21 percent from $4,313 in March 2007.

Agriculture land values in Nebraska have increased 88 percent over the last five years.

The largest increases from 2007 to 2008 came in cropland, whether irrigated or nonirrigated. In fact, dryland without irrigation potential had the largest jump at 26.7 percent to $1,583 an acre. Center-pivot irrigated land increased by 26.5 percent to $3,116.

The smallest increase, 12 percent,
came in nontillable grazing land.

"Today's level represents a new historical peak value, not only in nominal terms, but also in real, inflation-adjusted terms,'' Johnson said.

The previous peak in inflation-adjusted dollars was in 1981, just before a major drop in land values during the farm-crisis years of the mid-1980s.

"This (the ethanol demand for corn), in combination with rising world demand for essentially all of Nebraska-grown commodities, has created a phenomenal income effect across the entire state,'' Johnson said.

Income gains quickly translate to higher values for farmland, he said.

Preliminary estimates from the 2008 survey show the largest percentage gains occurred in the northeast region, where values increased 28 percent. Following closely was the southeast region, up 26 percent.

The smallest of the regional gains was 15 percent for land in the northwest, which has only recently benefited from surges in commodity prices.

Over the last five years, the average price of Iowa farmland has increased 67 percent.