Iowa farmland prices have increased by an average of 18% during the last 12 months, according to the latest survey by the Iowa Farm Realtors Land Institute. The survey of farm real estate brokers was conducted around March 1 and results released March 19.
The survey shows an average increase of 11% for the six month period September 2007 to March 2008. "When that 11% is combined with the 7.1% increase we reported back in September, it shows a statewide average increase of 18.1% for the year from March 1, 2007 to March 1, 2008," says Troy Louwagie, who helps compile the twice per year survey.
Louwagie, who coordinates the survey, is a realtor with Hertz Real Estate Services at Mt. Vernon. "These results show continuing strength in Iowa's farmland market," he says. "This was the highest dollar per acre number we've ever had, the second highest six-month gain and the third highest annual increase over the last 30 years since the survey began."
While these are averages for the whole state, there are some individual sales of the highest quality farmland that have sold for as much as $7,000 to $9,000 per acre in the last month or so in Iowa.
Iowa average is up 67% over last five years
There are not a lot of places where you could put your money and have made more than that this past year. "If you look back over the last five years, Iowa's farmland values have gone up just shy of 67% during the five year period," says Louwagie.
The survey breaks land into high-, medium- and low-quality grades for the nine crop reporting districts in Iowa. Statewide, the best Iowa farmland rose 21% in the year ending March 1, 2008. "In seven of the districts in Iowa high quality land is now exceeding $5,000 per acre," says Louwagie. "The average for the state is $5,223 for the best cropland. West central Iowa actually has the highest value at $5,630 per acre."
Last September there was just one district where high quality land exceeded $5,000 per acre, he says. If you look at the lower quality cropland in this most recent survey, the average is $3,345 per acre for the state.
Second-highest six month rise in 30 years
"This 11% increase since last September is the second-highest six month increase since we've been doing the survey for the last 30 years," he adds. "Back in March of 2007, just a year ago, we were up 13.6% for the six month period."
Timberland in Iowa, often purchased by people looking for hunting or recreational property, rose 12% to an average of $2,045 an acre during the six months ended March 1, 2008.
Survey respondents were asked to estimate the average price of farmland as of March 1. They said continued increases in corn and soybean prices, expansion of Iowa's ethanol industry, the limited amount of land offered for sale, good crop yields last year and a positive attitude about agriculture contributed to the increase in farmland prices. Other positive influences on the farmland market include relatively low long-term interest rates and higher cash rent for farmland.
Concerns about the future of farmland prices that were mentioned by survey respondents included uncertainty about the government farm program being debated in Congress, increased fuel and fertilizer costs and decreasing returns in the livestock industry.
A lot of interest in value of farmland
The survey has been conducted every March and September since 1978 by the Iowa Farm and land Chapter 2 Realtors Land Institute, which is comprised of real estate brokers who specialize in farm and land sales, farm management and appraisals. The land institute's survey is consistent with the results of land surveys conducted recently by the Federal Reserve Bank of Chicago and by Iowa State University Extension.
The Chicago Fed's most recent survey showed that Iowa farmland prices rose 6% in the fourth quarter and 18% in 2007. ISU Extension's annual survey released in December showed that Iowa prices rose 22% in the year that ended in November 2007.
There's a great deal of interest in the value of land not only from people in agriculture but from people outside of agriculture, too, Louwagie notes. "It's a hot topic. For many landowners, land is their primary asset and everyone is tracking to see what the health of the farm economy is doing and the value of land is one way to track that."
Farmland is an important part of the investment portfolios of many Iowans, including the heirs of farmers and other landowners. High land prices are a boon for retiring farmers who want to cash out, but they are cited as a barrier for young people trying to buy land to start farming.
Record farm income fuels positive outlook
As you look at land values, often they are a reflection of how agriculture is doing financially. "In the 1980s, we saw land values slip and then plummet, now we're seeing them increase," says Bill Northey, Iowa Secretary of Agriculture. "This latest increase is very significant."
Agriculture is now enjoying record net farm income thanks to high grain prices, prompting the 11% Iowa land value increase over the last six months. "That shows the positive attitude people have about the future," says Northey. "Many people believe these good grain prices will continue for awhile. You also see the positive economic outlook in the machinery market, and the profitability of manufacturers and other ag input suppliers. Today's prosperity in agriculture is good for Iowa's economy in general.
"We are fortunate to have agriculture in Iowa, because it is doing well. Looking at other states, and the rest of the economy, there are sectors that are facing some tough times," notes Northey. "But thanks to Iowa's strong agricultural economy, Iowa's general economy is doing pretty well. That's certainly important in terms of more tax dollars coming into the state treasury, and the strong ag economy is creating jobs for the people of Iowa.
"There are a lot of other side benefits that Iowa's economy is enjoying thanks to these good times in agriculture. We saw the downside during the tough times we suffered through in the 1980s, when the whole state was impacted by the farm financial crisis. We need to enjoy these good times today and appreciate agriculture for the positive impact it is having right now."