Average Value of Iowa Farmland Declines By 2% In 2009

The drop is the first since 1999, following five years of double-digit percentage increases in the statewide average value per acre.

Published on: Dec 17, 2009

The average value of an acre of farmland in Iowa declined in 2009 for the first time in a decade, according to an annual survey conducted by Iowa State University Extension. ISU Extension farm economist Mike Duffy announced the results of the survey at a press conference December 16 at Ames.

 

Duffy, who conducts the survey, says the statewide average as of Nov. 1 this year was $4,371 an acre, down 2.2% or $97 from the 2008 figure of $4,468.

 

Land prices currently seem to be in a “holding pattern”

 

Considering the steeper declines in land values that were reported by realtors, auctioneers and others earlier this year, Duffy says the slide in land values appears to have stopped now and land values are currently in a holding pattern, seeking some direction for the future.

 

When you look at ISU’s November 1, 2009 survey data county-by-county, some counties are up and some are down in value compared to a year ago. “Overall, the statewide average is down only about 2.2% for 2009,” notes Duffy.

 

He adds, “When you consider the decline in corn and soybean prices in 2009 compared to what they were in 2008, and the poor profitability in the livestock sector during the past year—particularly for hogs and dairy--the decline in land values isn’t as great as we might have thought this survey might show. Before our survey results came in and before we found out what they were, I was anticipating that perhaps we would see a 5% or so average decline in Iowa land values for the year 2009. But it’s only a 2.2% decline, according to our survey.”

 

This is first drop in Iowa’s statewide average since 1999

 

The last time the statewide average land value dropped was in 1999, when the survey reported the average was $1,781 an acre, or $20 less per acre than in 1998. In the decade since 1999, owners of Iowa farmland have watched their holdings increase in value by 145% on average.

 

Duffy says the slight decrease in land values in 2009 as reported in the ISU survey may contain some good news compared to other surveys that look at land values in Iowa. He notes the 2.2% decline covered sales for the time period between November 2008 and November 2009. It compares with a 7.6% decrease reported by the Realtors Land Institute for their survey covering the period from September 2008 to March 2009, and a 7% decrease from October 2008 to October 2009 reported by the Seventh District of the Federal Reserve Board. The Federal Reserve Board report included an increase of 4% from July to October of 2009.

 

“The decrease in land values now appears to have stopped,” says Duffy. “The situation has stabilized but for how long is unknown.”

 

Decrease in farmland values appears to have stopped

 

While land values on average declined slightly in 2009, this latest ISU survey reports that 14 counties showed increases. The counties with increases included several in east central Iowa where the 2008 flooding held down the gains shown in other parts of the state last year.

 

Duffy says the recent trends in the value of Iowa land are not surprising given the relative change in the value of crops produced in Iowa over the past few years. “The value of corn production in Iowa increased 64% from 2006 to 2007, but decreased 15% from 2007 to 2008, based on year-end summaries by USDA,” he notes. The value of the soybean crop increased 40% two years ago and then decreased 9% last year. Year-end reports are likely to show additional declines in total crop income, based on crop prices and the difficult harvest.

 

The ISU survey also found a major decrease in the amount of land sold during the past year. The trend toward greater demand for higher quality land continued, and there also was an increase in the percentage of land being purchased by existing farmers, correlating with a decline in investor land purchases.

 

Northwest Iowa has highest average value at $5,364 per acre

 

Of the nine crop reporting districts in the state, Northwest Iowa reported the highest average value at $5,364 per acre, in the survey as of November 1, 2009. The lowest average in the state is in South Central Iowa at $2,537 per acre. The only district that showed an increase over 2008 is East Central, up 1.1% an acre.

 

The highest county average in the state is Scott County at $6,361 per acre, up 0.8% from last year when it also was the highest. Decatur County is lowest at $1,957 per acre. Lyon County leads the state with the largest dollar increase at $237 per acre, while Allamakee County has the largest percentage increase at 5.7% for 2009. The greatest dollar and percentage decreases were $384 and 6.6%, both in Black Hawk County.

 

The survey asks particpants to estimate the value of land in three categories—low, medium and high grade land. Low grade land in the state in 2009 averaged $2,884 per acre, a decrease of $83 or 2.8% compared to the 2008 survey. Medium grade land averaged $4,076 per acre, a $119 decrease or a 2.8% decline from 2008.  High grade land averaged $5,321 per acre, a decrease of $60 or 1.1% less than in 2008.

 

ISU surveys people who are knowledgeable about land sales

 

The annual survey and other data on farmland sales have been collected by Iowa State University annually since 1941. About 1,100 copies of this survey are mailed each year to licensed real estate brokers, ag lenders, and others knowledgeable of Iowa land values. Respondents are asked to report values as of November 1. This year, 457 usable surveys were returned, providing 571 individual county estimates, including land values in nearby counties if they had knowledge of values in those counties.

 

Additional information on the 2009 survey and an archived version of Duffy's news conference announcing the results are available online at www.extension.iastate.edu/landvalue/

 

The following chart indicates 2009 values by crop reporting district and county, 2008 values, dollar change from 2008 to 2009, and percentage change from 2008 to 2009.

 

2009               2008              $ change      % change

Northwest        $5,364            $5,395             - $31               - 0.6%

North Central   $4,827            $4,950            - $123             - 2.5%

Northeast         $4,464            $4,590            - $126             - 2.8%

West Central    $4,652            $4,823            - $171             - 3.6%

Central             $5,026            $5,280            - $253             - 4.8%

East Central      $4,796            $4,743            + $53             + 1.1%

Southwest        $3,559            $3,626            - $67               - 1.8%

South Central   $2,537            $2,573            - $36               - 1.4%

Southeast         $3,832            $3,913            - $81               - 2.1%

 

State Average     $4,371               $4,468          - $97            - 2.2%