The rapid rise in Iowa farmland prices has slowed in the last six months as more land has come onto the market. That's what the latest statewide survey shows.
Iowa farmland prices rose by an average of 7.1% in the six month period ended Sept. 1, according to the Iowa Farm and Land Chapter 2 Realtors Land Institute, which released its survey results on September 17.
Since last fall, prices of Iowa farmland have increased at a record rate of 20.7%, says Troy Louwagie, chairman of the land institute's survey committee. The previous record annual increase was 20.2%, which was set in 1988. The demand for more corn and soybeans to make biofuels is driving up the value of farmland.
Rise of 20.7% in past year
The Iowa farm realtor's institute surveys its members twice a year, in March and in September.
"Results of our latest survey show a statewide average increase in cropland values of 7.1% for the March 2007 to September 2007 period," he says. "When we combine this with the 13.6% increase we reported last March, it shows a statewide average increase of 20.7% for the year Sept. 1, 2006 to Sept. 1, 2007."
This is a record rise. "Our organization has been doing this survey for about 30 years and the 20.7% increase for the year is a record for us," says Louwagie. "Back in 1988 it was 20.2%. This latest survey shows the largest percentage increase for a 1-year period since we've been running our survey."
More land is being offered for sale
What are actual listings and numbers of sales doing now, compared to the past? Are we starting to see more listings of land for sale to take advantage of the high market?
"We definitely have seen more listings and more auctions the last 30 to 60 days than we saw the last six months or even a year ago," he says. "With record high land prices and lower capital gains tax, some folks are deciding to sell at these levels."
Some of the best Iowa cropland has recently sold for seemingly astronomical prices - ranging from $5,000 to $8,000 per acre. What is the range on prices? "For the 9 crop reporting districts in Iowa, we break it into high quality, medium and low quality land," explains Louwagie.
Central Iowa averages $5,064
High quality cropland averaged $4,655 per acre for the state, in this new survey. In the central Iowa crop reporting district the best land is averaging $5,064. That's the first time a district has exceeded the $5,000 mark. All districts except south central are in excess of $4,000 for the high quality cropland.
It looks like every piece of farmland in Iowa has become more valuable. What's going on in neighboring states? It's very similar in Illinois, Nebraska, Minnesota and Missouri - similar increases in land prices. There's a lot of strength in the land market across the Midwest, says Louwagie.
"We're seeing a larger amount of land coming on the market now," he adds. "There's a little concern among realtors that maybe the market is getting a little top heavy. I think land is going to follow grain prices once we get into the fall harvest and once we know what our yields are and what direction grain prices are going to go."