Iowa Farmland Value Reaches Historic $8,716 Statewide Average For 2013

Average value of Iowa farmland is $8,716 per acre in 2013, an increase of 5.1% from 2012, according to ISU's annual survey.

Published on: Dec 12, 2013

Average Iowa farmland value is estimated to be $8,716 per acre, an increase of 5.1% from 2012, according to results of the Iowa Land Value Survey released December 11 at a press conference at Iowa State University in Ames. Values increased in 2013 for the fourth year in a row and achieved historic peaks.

The annual survey was conducted in November by ISU Extension, the data was analyzed and the results were released at the December 11 press conference. ISU Extension economist Mike Duffy oversees the survey. "The land market in 2013 is in flux, with strong and weak price sales occurring at the same time," he notes. "The key question is whether this shows that the land market is going to settle, or is it just pausing before another increase in values. Or has the land market peaked and is now due for a correction?"

LAND PRICES SOFTENING?: The average Iowa farmland value is estimated to be $8,716 per acre for 2013, an increase of 5.1% from 2012, according to results of the Iowa Land Value Survey released Dec. 11 by Iowa State University. Values increased in 2013 for the fourth year in a row and achieved historic peaks. But with lower commodity prices already here and forecast for soft crop prices in 2014, land values may be heading lower in 2014.
LAND PRICES SOFTENING?: The average Iowa farmland value is estimated to be $8,716 per acre for 2013, an increase of 5.1% from 2012, according to results of the Iowa Land Value Survey released Dec. 11 by Iowa State University. Values increased in 2013 for the fourth year in a row and achieved historic peaks. But with lower commodity prices already here and forecast for soft crop prices in 2014, land values may be heading lower in 2014.

The 5.1% statewide average increase for 2013 over the previous year is similar to results of other recent Iowa farmland value surveys, including the Federal Reserve Bank of Chicago and the Iowa Chapter of the Realtors Land Institute surveys.

Scott County, at $12,413 per acre, has the highest average county value for farmland in 2013

Scott County, with an estimated $12,413 average value for all farmland, saw the highest average county values in the ISU survey for 2013. Scott County also had the highest percentage increase and highest increase in value, 12.45% and $1,374 respectively, of the 99 Iowa counties. The Northwest Crop Reporting District reported the highest land values at $10,960, which was a decrease of $445 (3.9%) from 2012. O'Brien County showed the highest dollar decrease in 2013 of $478. Osceola, Dickinson and Lyon counties along with O'Brien County all shared the greatest percentage decrease in 2013, with 3.72%.~~~PAGE_BREAK_HERE~~~

The price of corn and soybeans has fallen in recent months. Duffy says the ISU survey data show the rate of increase in land values slowed as the commodity prices began dropping after June of this year. He sees other factors that are unknown and they could determine if land values continue a record pace or if they back off. "We still don't have a Farm Bill from Congress and in fact we don't even know what it is going to be," he notes. He also says the unknown future of the ethanol mandate, what's going to happen to the price of oil as a factor. We're also seeing a shift from petroleum to natural gas in this country and there's uncertainty over the economy in Southeast Asia. These are all factors."

Lack of a Farm Bill, proposed ethanol mandate and the uncertain weather outlook are all unsettling factors for land market

The weather situation is another factor that could make a difference in commodity prices and eventually farmland values. "Today, the land market is looking for direction," he says. "In some cases the sales are high, but some sales are low and in some cases there have been some "no" sales. A big part of that is the reflection of the uncertainty," says Duffy.

Have Iowa land values peaked? Or are they just taking a breather before getting ready for another increase?

Duffy says examining some causes for the current increase in farmland values and the reactions is helpful in assessing the situation. Farmland values are highly correlated with gross farm income. A majority of the survey respondents were concerned about income. Over three-fourths, 76%, of the respondents cited lower commodity prices as a negative factor affecting the land markets. Data show the rate of increase in land values slowed and commodity prices started dropping after June 2013.~~~PAGE_BREAK_HERE~~~

Iowa corn and soybean price movements are good indicators of gross farm income movement. There was a 33% drop in the Iowa average corn price from October 2012 to October 2013 and there was an 11% drop in soybean prices over the same time period. The November estimated price for Iowa corn was 39% lower than the November 2012 price. Soybean prices were 11% lower.

Odds are against a major collapse in farmland values; ISU economist doesn't foresee a repeat of 1985 farm financial crisis

There are many competing forces that will influence prices over the coming years. The ISU economist goes on to say, for now it appears there are more factors that will lead to lower prices as opposed to returning to levels of the past few years.

"Farm income is a strong indicator for the direction land values will go, but there are other factors as well," Duffy notes. "Interest rates remain low, but the percent of respondents who reported less sales than in 2012 was the highest it's been since 1985.

The odds are against a major collapse in land values. But, if projections of a new lower level for commodity prices hold, then Duffy believes we should expect land values to drop. The economist said many respondents commented that the current situation might be a plateau.

Overview of 2013 Iowa land values, as reported in latest statewide ISU survey

While the highest county land values were reported in Scott County, Decatur County remained the lowest reported land value, $3,628 per acre. O'Brien County, which showed the highest county average value and greatest dollar increase in 2012, showed the highest dollar decrease in 2013 of $478. Osceola, Dickinson and Lyon counties along with O'Brien County all shared the highest percentage increase in 2012 and the greatest percentage decrease in 2013, with 3.72%.~~~PAGE_BREAK_HERE~~~

Low grade land in the state averaged $5,298 per acre and showed a 3.5% increase or $179 per acre, while medium grade land averaged $8,047 per acre; high grade land averaged $10,828 per acre. The lowest land value was estimated in the South Central Crop Reporting District at $4,791 per acre, while the lowest percentage decrease was in the Northwest Crop Reporting District with a 3.9% decrease. The Southeast Crop Reporting District reported a 13.3% increase, the highest district percentage reported.

Maps showing 2013 values, percentage change and comparisons to 2012 data and additional information from Duffy are available online.

The Iowa Land Value Survey began in 1941 and is sponsored by the Iowa Agriculture & Home Economics Experiment Station at Iowa State University. Only the state average and the district averages are based directly on the Iowa State survey data. The county estimates are derived using a procedure that combines survey results with data from the U.S. Census of Agriculture.

The survey is based on reports by licensed real estate brokers and selected individuals considered knowledgeable of land market conditions. The 2013 survey is based on 476 usable responses providing 674 county land value estimates. The survey is intended to provide information on general land value trends, geographical land price relationships and factors influencing the Iowa land market. It is not intended to provide an estimate for any particular piece of property.