Wallaces Farmer

Despite pandemic, drought and derecho, average value of Iowa farmland climbs 1.7%.

Rod Swoboda

December 23, 2020

5 Min Read
Combine in soybean field
SUPPORT: A limited supply of land for sale and low interest rates to finance land purchases are key reasons land prices have stabilized. Courtesy of ISU

Iowa farmland increased in value by a modest 1.7% in 2020. That's the statewide average reported by the annual Iowa State University’s Iowa Land Value Survey. The increase came despite the global pandemic disrupting demand for ag commodities and a hurricane-force derecho that damaged millions of acres of Iowa corn and soybeans.

Low interest rates, strong demand for land and substantial government payments to shore up agriculture “helped stabilize Iowa's farmland market in a year in which Iowa farmers faced the derecho destruction, drought, significant uncertainties in U.S. ag trade and a pandemic that significantly altered market demand,” the survey report says. Released Dec. 15, the report gives a snapshot of land values in Iowa as of early November when the survey was conducted.

The average price of farmland climbed 1.7% to $7,559 per acre in 2020, up from $7,432 per acre in 2019. Land values increased in 78 of Iowa's 99 counties. While the survey showed land values increasing, it also showed the increase wasn't uniform. Low-quality farmland in Iowa rose 6.7% in value to an average of $5,078 per acre. Medium-quality land rose 2.6% to $7,119 per acre, and high-quality land decreased 0.1% to $9,068 per acre.

Overcoming negative factors

“The land market faced downward pressure initially with the onset of the COVID-19 pandemic, which lowered food demand and resulted in declines in livestock and ethanol prices,” says Wendong Zhang, an ISU ag economist in charge of the annual survey. “But improved trade at the end of the year helped boost prices for corn, soybeans, hogs and cattle.”

China’s efforts to rebuild its hog herd boosted demand for feed grains. “China remains at least 10% to 15% short of its regular hog inventory, so farmers should continue seeing increased feed grain demand,” Zhang says.

Also, Germany, a key U.S. competitor in pork exports, is now trying to control African swine fever in its hog herd. The disease decimated China's swine industry and drove the increase in China's purchases of U.S. pork.

“There are definitely concerns and downside risk regarding corn and soybean price rallies after the 2020 harvest,” Zhang says. “Postharvest prices are typically lower, not higher However, the higher crop prices during and after the 2020 harvest have helped support the land market.”

Government financial aid

Government payments in 2020 that were designed to help farmers cope with financial losses from market disruptions tied to the coronavirus pandemic helped the farmland market “in a big way,” Zhang says. All totaled, those payments made up 39% of the $119.6 billion in U.S. farm income. The $46.5 billion in government assistance more than doubled the payments provided in 2019.

Investors began to see land as a “safe haven” for investment dollars, especially when the large federal payments began coming. Market Facilitation Program payments and COVID-19 relief payments boosted farm income. “Some investors are thinking of farmland as an investment, but not necessarily just as cropland,” Zhang says. “That could be helping support the market for low-quality land.”

The low-quality category includes pasture and timberland that some buyers are looking at as recreational land, which is more popular due to COVID-19. People are looking at it for hunting and other outdoor recreation opportunities where they can practice social distancing.

Scott County highest value

With 78 of Iowa's 99 counties showing an increase in land values in 2020, Scott County in eastern Iowa again reported the highest overall value at $10,659 per acre (down $178 from last year). Decatur County in southern Iowa had the lowest average value in 2020 at $3,849 per acre, which was up $264 per acre from 2019. Wayne County in southern Iowa reported the largest percentage increase at 7.7%, while Lyon County in northwest Iowa had the largest dollar amount increase at $577 per acre.

Looking at ISU's 2020 survey according to crop reporting district, it's a mixed bag for land values:

  • northwest Iowa, up 2%

  • north-central Iowa, up 0.2%

  • northeast Iowa, up 2.7%

  • west-central Iowa, up 3.9%

  • central Iowa, up 1.8%

  • east-central Iowa, up 0.6%

  • southwest Iowa, down 0.9%

  • south-central Iowa, up 3.8%

  • southeast Iowa, up 1%.

The Northwest crop reporting district had the highest land values, with an average of $9,536 per acre; the South Central district reported the lowest, averaging $4,658 per acre. In general, land values across crop reporting districts increased — only the Southwest district reported a decline in land values (−0.9%). The largest percentage increases were in the west-central and south-central districts, 3.9% and 3.8%, respectively; however, both the northeast and Northwest districts reported increases of 2% or higher.

Map of 2020 Iowa land values

The 2020 ISU survey conducted in November is based on 707 usable responses from 484 ag professionals; 67% of the 484 respondents answered the survey online. The respondents are knowledgeable of land market conditions and include appraisers, farm managers, ag lenders and actual land sales. Purpose of the survey is to provide information on general land value trends, geographical land price relationships and factors influencing the Iowa land market.

These ISU survey results are consistent with trends shown in recent surveys by the Federal Reserve Bank of Chicago, the Realtors Land Institute and USDA.

Factors influencing land prices

In the 2020 ISU survey the most frequently mentioned positive factors influencing the land market were favorable interest rates, limited land supply and recent commodity price rallies. Other positive factors the respondents noted include COVID-related payments, other payments and strong demand for land, especially by farmers.

The most frequently mentioned negative factors affecting the land market were lower commodity prices, uncertainty due to COVID-19 pandemic and the weather. Other negative factors cited were political uncertainty related to the 2020 election, poor yields and general economic uncertainty.

Visit the Center for Agricultural and Rural Development at ISU for more information.

 

About the Author(s)

Rod Swoboda

Rod Swoboda is a former editor of Wallaces Farmer and is now retired.

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