A corporation from Delaware recently paid $52 million for part of the largest farm in Lincoln County.

It was the most money paid in a one-time land deal in Lincoln County in anyone’s memory.

The sale could mark a milestone in the way farm business is conducted in Nebraska. For nearly 25 years, from 1982-2006, the Nebraska Constitution prevented such corporations from owning any Nebraska farm or ranch land.

The state’s corporate farm ban was overturned in court in 2007, which provided even more spark to a land market that was already smoking from all-time record high crop prices.

Oppliger Farms sold the land to Lincoln Farm. Even though Oppliger kept some farm ground, the new Lincoln Farm land is still huge by traditional standards, covering nearly 30 square miles.

According to county records, the deal (which includes some ranchland) contained:

— 15,322 irrigated acres

— 3,690 grassland acres

— 108 dryland acres

— 53 acres of roads

— 20 acres of farm out buildings

— 7 residences of one acre each.

Lincoln Farm is a Wilmington, Del. limited liability corporation that was incorporated Feb. 5.

Apparently put together with investment fund money, the corporation bought the land a few days later, Feb. 20.

Paying the price

The total amount of land in the Oppliger-Lincoln Farm deal is 19,202 acres. Given the total $52 million price, it equates to an average of $2,700 per acre.

If one allows $2-4 million for grassland, houses and other acres, the cost of the irrigated land is more $3,000 an acre.

That is an extraordinary price, observers say, especially since some of the irrigated land is on sandy soils in the Middle Republican Natural Resources District. The amount of irrigation water is restricted for crops.

But then, all land prices are extraordinarily high these days.

How high?

According to a recent report by the University of Nebraska-Lincoln, the average value of farm and ranch land rose 23 percent last year

That was the steepest annual gain ever recorded in the 30 years that UNL has conducted the study.

That one-year increase, combined with the gains of the previous four years, puts current farm and ranch land value 88 percent higher than 2003 level – nearly twice as high as five years ago.

The prices are historic, not only in nominal terms, but in real (inflation-adjusted) terms, said UNL Economics Professor Bruce Johnson.

The previous peak was in 1981, “just prior to a major asset devaluation during the farm crisis years of the mid-1980s,” Johnson said in the report.

Oppliger goes on

Don Oppliger is a New Mexico cattle feeder and farmer who has also farmed in Texas.

He had acquired a Lincoln County feedyard, plus farm and ranch land that was formerly acquired by Prudential Insurance in the 1970s. Prudential sold the land during the farm crisis in the 80s, and Opplinger came to own it.

Oppliger added more land, plus a giant warehouse near Wallace to store and ship potatoes that were grown under some of the pivots.

At one time, Oppliger owned more cropland than any other person in Nebraska, according to U.S. government records. In 2005, he collected nearly $700,000 in federal crop subsidies, the most of any person in Nebraska.

After selling the land to Lincoln Farm, LLC, Oppliger still has 5,522 acres (8.6 square miles) of agricultural land, plus 18 houses and/or lots in the village of Wallace as well as a house and three lots near North Platte.

Memories

The memories of the mid-1980s still cause people to shudder. Land prices soared to record highs. Then crop prices dropped as interest rates doubled. Foreclosures were rampant. Virtually every aspect of agriculture suffered big loses.

The farm crisis marked the end of decades of modest prosperity and farm expansion that began after World War II. It also contributed to the demise of small family farms.

Nebraska farm organizations, concerned about the loss of rural families, organized a petition drive to prohibit corporations from owning farmland. A majority of voters approved, and the Nebraska Constitution was amended to prohibit non-family corporations from owning farm and ranch land.

That law stood until 2007, when a federal court overturned the so-called “Initiative 300” because it restricted interstate commerce.

Dangerous times

In the 1980s, Nebraska irrigated land reached a top price of around $3,000.

Today, irrigated farmland is brings as much as $4,000 in eastern Nebraska where soils are heavier, the growing season is a little longer and rain more plentiful.

Prices for good irrigated ground in west-central Nebraska have generally been just below $3,000 an acre, said Gary McCormick, a North Platte real estate agent and appraiser.

But, one day is not another, McCormick said.

“It is an interesting time to be an appraiser,” he said. “Each sale is unique and prices are generally higher.”

Mortgage banker Skip Marland of North Platte has been in agricultural real estate for 33 years. During the farm crisis, he managed foreclosed farms and ranches in three states. Those were rough days and he remembers them well.

However, although today’s prices are unprecedented, Marland remains calm.

“I’ve been in it long enough, not a lot makes me nervous anymore,” he said with a chuckle, “even though I see some of the same earmarks as we saw in 1981.”

As happened in 1981, farmland of marginal quality is currently commanding prices “that are probably higher than justified, compared to good land,” Marland said.

However, a big difference now is that land buyers have less debt than they did in the 80s. More cash is available, some of it from corporations.

“There is a lot of money out there,” Marland said.

In the 80s, farmers typically borrowed 70 percent or more of the money to buy the high priced land. Then, when interest rates went from 9 percent to 20 percent, the highly leveraged owners lost the farm, Marland said.

“When I-300 was set aside, that brought on institutional fund investment, which had not been the case since 1982,” Marland said.

Today, land is being purchased with “equity money” as opposed to “debt money,” and those types of buyers are typically financially stable, Marland said.

“They (institutional funds) may not know the exact relative value of the land, but they will develop a rate of return for the investment, with the returns coming from custom farming, or cash rents, a guaranteed number of bushels or so forth,” Marland said.

McCormick agreed that the farmland boom appears to be real, especially for cropland.

“I think grain and land prices have a good future,” he said, “mostly because ethanol appears to be here to stay.”

McCormick worries about the rising price of pastureland, which UNL reports has gone up nearly 15 percent in a year.

Soaring pasture prices don’t conform to the current prices of cattle, which are about the same as five years ago, while feed costs have doubled.

Risky

A farm operator faces nearly as many financial risks today as in the 80s, Marland said.

Fertilizers and herbicides increased more than 40 percent from 2006 to ’07 — and are up significantly again in 2008.

Fuel prices reach a new all-time high nearly every week. Diesel fuel for a typical pivot in the hills will cost nearly $100 an acre. Machinery, parts, seed, herbicide, pesticide and fertilizer are all soaring.

The overall costs of inputs for corn can run as high as $700 an acre if the going gets tough, McCormick said. At $5 corn, a yield of nearly 140 bushels per acre would be needed to break even.

“It remains to be seen if the farmer will end up with more income than they would with, say, $2.50 corn and lower input costs,” Marland said. “But one thing is certain, the level of risk from handling larger amounts of money has increased.”

Farmers try to pick “a good day to sell” crops, when the market is high. Thanks to marketing agreements through grain elevators, farmers can pick a day to sell any time. But with high grain prices that jump around, the decision is not easy.

One marketing mistake can cost a farmer $50,000, said Fran Thooft, a grain originator with Ag Valley Cooperative’s main offices in Edison.

“Before, with lower prices and a daily change of just a few pennies, one mistake was not that big of a deal,” Thooft said.