It appeared that farmland prices had stabilized in Iowa following a recent uptrend in land values. However, the March 1 survey by the Iowa Chapter of the Realtors Land Institute was recently released, and it shows a 2.9% increase in average cropland values for Iowa since last September.

The inventory of farms available for purchase continues to be historically low, Realtors say. Currently, 5.26 farms per county across Iowa are on the market for sale, and of those, only 1.58 farms per county are highly tillable tracts. Those figures come from Brad Hayes, an appraiser for People’s Co., a Des Moines-based realty company that specializes in farmland.

There continues to be strong demand by operators who are looking to expand their farming operations. There’s also continued strong demand by investors purchasing land at public sales. Overall, farm operators are still the primary buyers of farmland, but investors are setting a floor on land values, Hayes says. Farmers appeared to be more optimistic about the ag economy at the end of 2017 when compared to the end of 2016. Now, lenders across the state say they are seeing some stress in the land market.

Forced land sales
“Numerous operators are struggling to get through this current ag economic downturn and low profitability,” says Hayes. “We continue to monitor these scenarios. We predict there will be more distressed land sales in 2018 than in 2017. High crop yields last year did assist farmers in managing their farming operations with continued low commodity prices.”

Reviewing and summarizing the 2017 data accumulated by the People’s Co. appraisal team, “we found there were more than 2,179 tracts of land available and publicly exposed to the marketplace throughout the state,” Hayes says. “Of these tracts, 790 were sold through public auction. Of those 790 tracts, 52 did not meet the reserve price and thus were not successfully sold. For the 790 tracts marketed for auction, the gross amount of land was approximately 86,000 acres.”

Land values in 2017
Hayes has a chart showing the most recent decline in Iowa land values occurred between the fourth quarter of 2015 and the first quarter of 2016. Land values increased through the second quarter of 2017 and stabilized through the last nine months of 2017. The chart references the average dollar per CSR2 point on tillable acres.

The fourth quarter of 2017 reflected $122 per CSR2 point. These figures are based on a data set that includes farms sold at public auction and have 85% or greater tillable acres, he says.

With the overall economy being strong, land value trends for pastureland and recreational land were stable throughout 2017. The livestock markets have rebounded with new processing plants being constructed in Iowa. There is high demand for new livestock facilities throughout the state, with swine confinement units having the highest demand.

Cash rent and interest rates
Other topics of interest are cash rents and interest rates. “Discussing this with farm managers across the state, we find cash rents for cropland have remained stable over the previous two years, and cash rents for the 2018 crop year will be relatively equal to 2017,” Hayes says. “Interest rates have begun to increase, which could bear additional financial stress on farm operators who are restructuring debt.”

Alternatively, there are numerous farm operators and landowners in the marketplace who are not leveraging their financing and making land purchases. “Therefore, we look forward to monitoring the correlation between land values and interest rates through 2018 and the years ahead,” he adds.