The average value of an acre of farmland in Iowa increased 15.9% in 2010, according to the annual survey conducted by Iowa State University Extension. Mike Duffy, ISU Extension economist who conducts the survey, says the statewide average land value as of November 1 this year is $5,064 an acre, up $693 per acre from 2009.
The $5,064 figure approaches the all-time high, inflation-adjusted average of $5,711 per acre in 1979. The ISU survey results are based on responses to 1,100 surveys sent to farmland realtors, farmers and lenders between November 2009 and November 2010. The 479 useable responses provided 627 individual county estimates. Duffy reported the 2010 survey results and discussed trends in land values at a press conference December 15 at ISU at Ames.
The 2010 survey shows a substantial increase in land values following a drop in 2009. "We need to watch the land values and be prudent in buying land, but I don't think we need to be overly pessimistic that there will be a crash in land values anytime soon," says Duffy. "The rate of increase in 2010 appears high, but it is half the yearly increases in 1973, 1974 and 1975."
Land prices have surged in recent months along with grain prices
Duffy says it is important to remember the time span when evaluating survey results on land prices. "This has been especially true the past few years when corn and soybean prices have varied considerably," he notes. "Monthly prices for corn averaged 37% higher July to November this year compared to average monthly prices from January through June. Soybean prices are 21% higher over the same time span."
The survey conducted by Duffy is sponsored annually by the Iowa Agriculture and Home Economics Experiment Station at Iowa State University. Only the state average and the district averages are based directly on the ISU survey data. The county estimates are derived using a procedure that combines the Iowa State survey results with data from the U.S. Census of Agriculture.
O'Brien and Sioux counties now have the highest land values
Of the nine crop reporting districts in the state, the ISU survey for 2010 found the highest land values were reported for northwest Iowa at $6,356 per acre; the lowest land values were reported for south central Iowa at $2,690 per acre.
The highest county average in the state is O'Brien County at $7,148 per acre, up 16.2% from 2009. Sioux County, which is located next to O'Brien in northwest Iowa, is the only other county in Iowa that has an average of over $7,000 per acre. Decatur County in south central Iowa has the lowest average at $2,085 per acre and the lowest dollar increase at $128 per acre in 2010. The greatest dollar increase is $1,152 in Wright County; the highest percentage increase was in Kossuth County at 21.9% for 2010.
Duffy says land values should remain strong at least for the next several months. Beyond that there is a fair degree of uncertainty with respect to whether land values can maintain their current levels.
How long can land values sustain their currently high levels?
The volatility in corn and soybean prices and production costs has lead to tremendous uncertainty and volatility in the land market, as historically reflected in the ISU survey. Land values were up 22% in 2007, down 2.2% in 2009 and up 15.9% in 2010. Since 2004, Iowa land values are up 93%.
"In addition to the volatility in prices and costs, there has been a substantial shift in the fundamental supply and demand situation for farmland," says Duffy. "Over 60% of the 2009 respondents indicated there were fewer sales in 2009 compared to 2008. This was the largest drop in sales reported in the ISU survey. In 2010, almost three-fourths of the respondents said sales were either the same or less than in 2009. This shows the slump in sales is either continuing, or in some cases worsening, throughout the state."
Additional information and county land value tables are online
Data on farmland values have been collected by Iowa State University annually since 1941. About 1,100 copies of the survey are mailed each year to licensed real estate brokers, ag lenders and others knowledgeable of Iowa land values. Respondents are asked to report values as of November 1. This year 479 usable surveys provided 627 individual county estimates.
Additional information on the 2010 survey and an archived version of Duffy's news conference announcing the results are available online at www.extension.iastate.edu/landvalue/
Also, by clicking on 2010 Land Value Survey Tables you can view tables indicating 2010 values by crop reporting district and county, 2009 land values, dollar change from 2009 to 2010 and percentage change from 2009 to 2010.