Survey Shows Iowa Farmland Values Up 2.8% In Past 6 Months

Survey Shows Iowa Farmland Values Up 2.8% In Past 6 Months

State farmland prices rebound and central Iowa leads with 4.4% rise, according to survey of realtors.

Iowa farmland values rose by an average of 2.8% in the past 6 months, from September 2009 to March 2010, according to a survey of Iowa land realtors.
 
The survey by the Iowa Chapter of the Farm and Land Realtors Institute is conducted twice a year, in September and in March. The latest results were released March 23 and show an average price for all
Iowa cropland of $4,203 per acre, up 2.8% from the September figure.
 
The 2.8% increase in the last six months reversed declines of 7.6% in the March 2009 survey and 1.9% last September, according to Troy Louwagie, who coordinates the twice a year survey for the Iowa Farm and Land Realtors Institute. Louwagie is a realtor with Hertz Farm Management, working out of the firm’s
Mt. Vernon office in eastern Iowa.

All of
Iowa’s 9 crop reporting districts show an increase in value

The land value increase statewide of 2.8% shown in the March 2010 survey was led by a 4.4% increase in central
Iowa land prices, which had been down 3.3% last year in the realtors institute’s survey.

Factors supporting the recent rebound in land prices include low interest rates, a lack of alternative investments, a limited supply of land being offered for sale, strong cash rents and reduced input costs for crop production.

All of the nine crop reporting districts in the state showed increases curing the past 6 month period, ranging from a 4.4% increase in central Iowa to an eight-tenths of 1% increase in northeast Iowa.
 
The 2.8% state average increase reflects estimates as of March 1
 
The survey asked farm realtors to estimate the value of bare, unimproved cropland as of
March 1, 2010, says Louwagie. Based on 180 responses from the Iowa institute’s members who took part in the survey, the results showed the 2.8% average statewide increase for cropland values.
 
Pasture and timberland values were also polled and the survey found that the values for this type of land were down 4.5% and 4% respectively in the six month period ending
March 1, 2010. The recreational land market—such as wooded land and CRP for hunting etc.--has had a decline in demand during the past year.
 
Combining the 2.8% increase for
Iowa’s statewide cropland value reported in the March 2010 survey with the 1.9% decrease in cropland values reported in the September 2009 survey indicates a statewide average increase of 0.9% for the year ending March 1, 2010. So basically that’s a 1% increase in Iowa’s average value for cropland during the past 12 months, notes Louwagie.

Fewer land auctions held this winter than normal

There were fewer land auctions in late 2009 and in the first three months of this year compared to the year before, says Louwagie. That’s the traditional period for the bulk of farmland transactions. “Farmland is being held in pretty tight hands these days,” he notes.

Because the average age of
Iowa farmers is 60 years old, it is expected that large scale shifts in land ownership will occur over the next decade. “I think a lot of landowners who might normally want to sell their land now have taken a look at what other investments are offering these days. They’ve decided that they’d be better off just to keep their land and farm it, or rent it out, since farming is profitable and cash rents are pretty strong,” says Louwagie.

He points out that two important input expenses for farmers—fertilizer and fuel—cost about half of what they did a year ago. That helps to persuade farmers to keep their land rather than sell it. “So even if corn prices are down a little from last year, farmers are still looking at a fairly good financial situation for this year,” says Louwagie.

Main factors figure into why land values continue to hold strong

The survey respondents said factors contributing to the increase in farmland values include that fact that only a limited amount of land is being offered for sale, and there is a lack of attractive alternative investments. Also long term interest rates for borrowing money are favorable, and with lower crop input costs cash rents have remained strong. Concerns that could affect farmland values in the future include lower commodity prices, recent losses in the livestock industry, the uncertainty of future government programs and continued uncertainty in the
U.S. and world economy.

So where are land prices headed this year? “It’s heartening that they’ve turned around and are headed back up. But there’s still a lot of uncertainty,” says Louwagie. The record average statewide cropland value for
Iowa is an inflation-adjusted $5,711 per acre—which was set in 1979. Iowa farmland doubled in value from the end of the 1990s through 2008, primarily on the strength of rising demand for corn because of increased demand from ethanol and greater yields. The Iowa Realtors Land Institute has conducted the farmland survey since 1978.

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