Duffy believes there is still discipline in the land market, while land values have increased 64% in the past three years, in 2009 values did decrease by 2.2%. "Therefore, it is prudent to be mindful of the factors that influence land values," he notes. He says there are several key components to watch:
*Weather related problems – both here and around the world
* Government policies – especially policies related to estate and capital gains tax rates
* The amount of debt incurred with land acquisition
* What happens to input costs – land being the residual claimant to any excess profits in agriculture
* Government monetary policies as they relate to inflation and interest rates
* The performance of the U.S. economy and economies throughout the world – which impact commodity prices, which in turn impact land values
Overview of 2012 Iowa farmland values—highest values are in northwest Iowa, lowest values are along Iowa-Missouri border
While the highest county land values were reported in O'Brien County, Decatur County remained the lowest reported land value with $3,242 per acre, and the lowest dollar increase at $521. Keokuk and Washington Counties in southeast Iowa had the lowest percentage increase, 14.8%, with reported average values of $6,330 and $8,226, respectively. The drought of 2012 hit hardest in southeast and south central Iowa, which has softened the bidding somewhat for land in those areas, notes Duffy.
Low grade land in the state averaged $5,119 per acre and showed a 20.2% increase or $862 per acre, while medium grade land averaged $7,773 per acre; high grade land averaged $10,181 per acre. The lowest land value was estimated in the South Central Crop Reporting District at $4,308, while the lowest percentage increase was in the Southeast Crop Reporting District with an 8.2% increase. The Northwest Crop Reporting District reported a 36.8% increase, the highest district average percentage reported.
How long will land prices continue to rise? Or is this a bubble that's about to burst?
At the December 11 press conference at ISU in Ames, Duffy said he didn't think Iowa farmland values were vulnerable to the kind of steep dive, such as those that occurred during the 1980s farm financial crisis. That steep and continued drop in farmland values followed a land and commodity boom in the 1970s similar to the boom of recent years.