Iowa farmland values fall on lower commody prices

All nine crop reporting districts posted decreases over the last six months

George Ford
Published: March 27 2014 | 2:30 pm - Updated: 1 April 2014 | 10:14 am in

The average value of a good acre of Iowa farmland declined 5.4 percent to $11,104 over the last six months, according to a survey by the Iowa Chapter of Realtors Land Institute.

Combining the 5.4 percent decrease with the 1.2 percent increase reported in September indicates a statewide average decline of 4.2 percent for the year from March 1, 2013, to March 1 of this year.

That's a sharp contrast to previous increases reported by RLI. The average price of Iowa farmland jumped 17.1 percent from March 1, 2012, to March 1, 2013.

All nine crop reporting districts posted decreases over the last six months, according to the RLI survey. The districts varied from a 2.1 percent decrease in southwest Iowa to an 8.4 percent drop in southeast Iowa.

Troy Louwagie of Hertz Farm Management in Mount Vernon said a number of factors contributed to the moderation of Iowa farmland prices.

"The market for farmland in May, June and July was probably one of the strongest that we've had and that tailed off through the fall and the first couple of months this year," Louwagie said. "The primary reason was the drop in commodity prices."

Other factors cited by RLI include higher input costs, increasing interest rates, government regulation uncertainty, and uncertainty of the U.S. and world economy.

Positive factors for farmland values include low interest rates, limited amount of land offered for sale, strong livestock market, renewed interest from investors, lack of stable alternative investments, cash on hand, and fear of inflation.

"There are a lot of farmers who had some pretty good years when corn prices were at $8 a bushel," Louwagie said. "They realize that their money is not earning them too much in a bank account, so they're buying farmland.

"I view this as a small market correction. We could not sustain the kind of double-digit increases we were seeing in recent years, not with the drop in commodity prices."

The RLI results mirror a Federal Reserve Bank of Chicago farmland values survey released last month.

The average value of an acre of good quality Iowa farmland fell 1 percent from the third quarter of 2013 to the end of the fourth quarter. On a year-over-year basis, the average value of agricultural land in Iowa slid 2 percent from Jan. 1, 2013, to Jan. 1, 2014.

Overall, the five-state Seventh Federal Reserve District had an annual increase of 5 percent in farmland values, but appeared to be slowing. The survey of 186 agricultural banks across the district found agricultural land values rose 3 percent from the third quarter to the fourth quarter of 2013.

Louwagie said there are indications that Iowa farmland values received a bump when commodity prices rallied in the last few weeks. He pointed to the recent sale of farmland in Benton County that sold for $13,000 an acre.

The U.S. Department of Agriculture on Monday will release its first report of the growing season on anticipated planting of corn and soybeans. A recent survey of farmers by Farm Futures magazine of St. Charles, Ill.,  shows they intend to boost soybean plantings while cutting back on corn.

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