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Serving: IA

New year may bring challenges to land values

deyanarobova/Getty images Corn stalks with silos in the background
A changing economic picture could weigh on land prices after a barnstorming 2021 sales year.

As we wrap up one year and begin another, I cannot help but think back 12 months and marvel at all that has occurred in agriculture — and our world — during 2021. The COVID-19 pandemic continued, but life started to trend toward some sense of normalcy.

A new U.S. president and administration assumed the mantle of power. The bull market in commodity prices, coupled with a solid growing season, ushered record profits at the farm level. Throughout the Corn Belt, we saw land values surge 20% to 30% higher year over year, depending on the survey you review.

As a result of the strength, astonishingly high sale volumes were offered to the land market in 2021. When the final numbers are tallied, I suspect 2021 will reflect a record number of sales.

Somehow, the record supply offered to the market this past year was outpaced only by an even more incredible demand for farms. Farmers, investors, institutions — they’ve all been aggressive buyers — and this supply-demand imbalance caused land prices to move consistently higher through the year.

Many factors were in play there — good crops, good prices, low interest rates, reentry of inflation, etc. It has been a historic year, and some are predicting it will continue.

Looking into 2022

As we enter a new year, I do believe the market will continue to reflect strength. I also believe that it will be difficult for the Iowa farmland market to duplicate all its 2021 results into and through 2022.

Does this mean market weakness? No, weakness would not characterize my thinking. But I believe there will be some key market differences developing for 2022 that are worth watching.

First, even with continuing strength in commodities, on-farm profits are very likely to be trimmed by higher input prices for 2022 production. This reduced margin may temper some of the enthusiasm widely seen in the 2021 market.

Second, inflation has roared back into our general economy, reaching levels not seen for 30-plus years. As a result, the easy-money posture of the Federal Reserve is likely to transition towards something more hawkish in 2022, with a likely increase in interest rates on deck. Incrementally higher interest rates may also temper market enthusiasm.

Third, China’s buying in 2020 and 2021 led to a huge demand spike for commodities, coupled with rebounding corn demand for ethanol in 2021; can these demand drivers continue in 2022? Said differently, in 2021 it was as if every factor that could play into pushing land values higher aligned to do so. As 2022 begins, if I’m honest, I’m beginning to see some possible light headwinds develop. Stay tuned. For now, however, enjoy the amazement that comes with the land-value advancement in 2021.

NORTHWEST

Lyon County. West of Doon, 80 acres recently sold at public auction for $19,000 per acre. The farm consisted of 79 tillable acres with a CSR2 (corn suitability rating) of 67.0, and equaled $287 per CSR2 point on the tillable acres.

NORTH CENTRAL

Mitchell County. Near McIntire, 81 acres recently sold at public auction for $17,500 per acre. The farm consisted of 77 tillable acres with a CSR2 of 83.2, and equaled $221 per CSR2 point on the tillable acres.

NORTHEAST

Allamakee County. Northwest of Waukon, 75 acres recently sold at public auction for $8,667 per acre. The farm consisted of 56 tillable acres with a CSR2 of 47.0, and equaled $247 per CSR2 point on the tillable acres. Note: The non-tillable balance of the farm was in three separate timber patches.

WEST CENTRAL

Monona County. Southeast of Whiting, 154 acres recently sold at public auction for $12,500 per acre. The farm consisted of 150 tillable acres with a CSR2 of 71.2, and equaled $179 per CSR2 point on the tillable acres.

CENTRAL

Hardin County. Northeast of Hubbard, 35 acres recently sold at public auction for $13,200 per acre. The farm consisted of 35 tillable acres with a CSR2 of 84.8, and equaled $157 per CSR2 point on the tillable acres.

EAST CENTRAL

Benton County. West of Urbana, 480 acres recently sold for $13,200 per acre. The farm consisted of 470 tillable acres with a CSR2 of 86.8, and equaled $155 per CSR2 point on the tillable acres.

SOUTHWEST

Montgomery County. South of Red Oak, 73 acres recently sold at public auction for $9,000 per acre. The farm consisted of 64 tillable acres with a CSR2 of 74.8, and equaled $137 per CSR2 point on the tillable acres.

SOUTH CENTRAL

Wayne County. Northeast of Humeston, 63 acres recently sold at public auction for $10,000 per acre. The farm consisted of 58 tillable acres with a CSR2 of 80.1, and equaled $137 per CSR2 point on the tillable acres.

SOUTHEAST

Washington County. North of Washington, 81 acres recently sold at public auction for $16,700 per acre. The farm consisted of 78 tillable acres with a CSR2 of 91.8, and equaled $189 per CSR2 point on the tillable acres.

Hensley is president of Hertz Real Estate Services, which compiled this list but did not handle all sales. Call Hertz at 515-382-1500 or 800-593-5263 or visit Hertz.ag. 

 

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