After falling in each of the three previous years, the average value of an acre of farmland in Iowa rose in 2017. The average statewide value of an acre of farmland is now estimated to be $7,326, an increase of 2% or $143 per acre from the 2016 estimate.
The 2017 Iowa State University Land Value Survey was conducted in November by the Center for Agricultural & Rural Development (CARD) and ISU Extension. The results are consistent with survey results by the Federal Reserve Bank of Chicago, the Realtors Land Institute and USDA. Wendong Zhang, an ISU professor of economics, led the annual ISU survey.
The $7,326-per-acre estimate and 2% increase in value represent a statewide average of low-, medium- and high-quality farmland. The survey also reports values for each land quality type, crop reporting district and all 99 counties individually.
Starting in 2004, several factors, including the ethanol boom and historically low interest rates, drove five consecutive years of double-digit growth in average farmland values, culminating in a historic peak of $8,716 per acre by 2013. Average land values then began an immediate decline, dropping 8.9%, 3.9% and 5.9% in the following three years. Those declines were the first time since the 1980s farm crisis that Iowa farmland values had declined three consecutive years.
Uptick doesn’t signal turnaround
The improved results in the 2017 survey fail to signal a change in the land market, says Zhang. A limited supply of land being offered for sale is the main factor driving the recent increase in land values. “Commodity prices and farm income are still stagnant,” he notes. “I wouldn’t consider this a turnaround of the land market. Given rising interest rates and stagnant farm income, I wouldn’t be surprised to see a continued decline in values in the future. This 2017 survey result, to me, is a temporary break in a downward adjustment trajectory.”
But the land market isn’t in a free fall either. The general outlook is probably for a relatively flat ag economy and a relatively flat land market in the near future, Zhang says. The biggest factor keeping land prices from falling is a lack of land coming onto the market. That’s due, in part, to people not wanting to sell into what they see as a declining market. Other factors supporting demand for land are low interest rates, surprisingly good crop yields, investor demand and availability of cash and credit.
Factors pushing land prices down include low crop prices, high input costs and uncertainty in the market and in government trade policy. In some areas of Iowa, a decline in Conservation Reserve Program payments could be a limiting factor.
The Realtors Land Institute’s Iowa Chapter surveyed farmers in September. It showed farmland values had climbed 2.9% to a statewide average of $6,694 per acre for the year ending in September. Kyle Hansen, a real estate agent with Hertz Farm Management, helps direct that survey. He says results of the recent ISU survey align with other surveys and measures of farmland values in Iowa.
A look at land values by county
ISU’s survey includes breakouts by crop reporting district and by county. Conducted annually since 1941, the survey provides a long-term measure of trends in land values. “Keep in mind that percentages and directions are more important than the actual land value figure,” Zhang says.
Only four of Iowa’s 99 counties — Fremont, Mills, Montgomery and Page — reported lower land values in 2017 than 2016. Each had a decline in value of 0.3%. For the fifth year in a row, Scott and Decatur counties reported the highest and lowest farmland values, respectively. Decatur County had a value per acre of $3,480, a gain of $37, or about 1.1% above last year’s report. Scott County reported a value of $10,497, an increase of $162 per acre, or about 1.6%.
Dubuque County had the largest dollar increase in value with a gain of $335 per acre, and Allamakee and Clayton counties had the largest percent increase in values, 4.7%. Of the four counties reporting a decrease in value, Mills County had the largest dollar decline in value, losing about $25 per acre.
Land values by district, land quality
Of Iowa’s nine crop reporting districts, only south-central reported a decrease in average value, with values falling from $4,241 per acre in 2016 to $4,172 in 2017, a loss of 1.6%. The northwest district again showed the highest overall value — $9,388 per acre, up from $9,243 per acre in 2016, a gain of 1.6%. The east-central district showed the largest percentage gain in value, 3.8%, bringing the average value there to $8,218.
Statewide the high-, medium- and low-quality farmland values increased 2%, 2.2%, and 0.5%, respectively. High-quality farmland saw the largest increase in value in the east-central district, 4.2%, and the largest decrease in the south-central district, 1.2%. Medium-quality farmland increased the most in the southeast district, 4.2%, and decreased the most in the south-central district, losing 1.2%. Low-quality farmland gained the most value in the northwest district, 3.3%, and decreased the most in the southwest district, where it fell 6.1%.
ISU conducts survey every November
ISU’s land value survey began in 1941, first in the nation, and is sponsored annually by ISU. The survey is conducted every November, results are released mid-December. Only the state average and district averages are based directly on the ISU survey data. The county estimates are derived using a procedure that combines the ISU survey results with data from the U.S. Census of Agriculture.
The ISU survey is based on reports by ag professionals knowledgeable of land market conditions, such as appraisers, farm managers and ag lenders. It is intended to provide information on general land value trends, geographical land price relationships and factors influencing the Iowa market. The 2017 survey is based on 877 usable responses from 710 ag professionals. Of these 710 respondents, 64% answered the survey online.
CARD offers a web portal at card.iastate.edu/farmland. It includes visualization tools, such as charts and interactive county maps, allowing users to examine land value trends over time at the county, district and state level.