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Prairie Grains is the official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

"These six counties all reported an increased acreage of pasture land relative to cropland. That switch had the effect of lowering the average value of all agricultural land," he says.

Barnes County realized the greatest increase from 1998, a 7% jump from $318.05 per acre to $340.75.

The ND Legislature has assigned the task of calculating the value of agricultural land by county to the NDSU agricultural economics department. These annual calculations are then provided to the North Dakota Tax Department.

Unlike residential, commercial and centrally assessed property, which are assessed based on market value, the assessment for agricultural land is based on the value of production, Aakre says. Officials at the county and township levels of government determine the assessed values of individual tracts of land using the NDSU county-wide averages.

Some tracts will be more valuable and some less valuable than the county average, Aakre says. But the total assessed value of land within a county must come within 5% (plus or minus) of a predetermined figure, which is the county’s average value for ag land multiplied by the total acreage.

The NDSU analysis uses a seven-year average (the most recent nine years minus the high and low years) to calculate total gross returns on ag land. The landlords’ share of gross returns is determined according to a formula outlined by the ND Century Code, Aakre says. The landlords’ share of gross returns is then divided by the annual capitalization rate to derive the average per acre land value for each county.

Also prescribed by state law is the calculation to determine the annual capitalization rate. It represents a 10-year average of interest rates charged for loans on ag land. Aakre says the capitalization rate peaked during the 1993-94 period at 11.40% and has been dropping ever since.

"The rate for the 1999 assessment is 9.77%, down from 10.14% last year," Aakre says. "As the capitalization rate declines, the result is higher estimated land values if productivity remains constant."

For the 1999 assessment, 32 North Dakota counties would have had lower land values if the capitalization rate had not changed because the average value of the crops and livestock produced in those counties dropped from 1998.

"Since 1994, more than half the increase in the estimated value of agricultural land in North Dakota has been due to the falling capitalization rate," says Aakre.

Value of All Agricultural land for 1998 and 1999

$ per Acre