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Neighbors Growing Together | Nov 24, 2014

Iowa farmland value now at nearly $8,300 per acre

By The Associated Press | Dec 24, 2012

(AP) — The Iowa State University’s annual Land Value Survey says the value of Iowa farmland rose 24 percent during the past year to set a record of nearly $8,300 an acre.

The survey in November included 486 responses from Iowa land brokers.

It was the third straight year that farmland value had risen more than 15 percent.

Iowa State Extension’s Mike Duffy, who oversees the survey, said the boom likely would fade during the next five years. Within two years, farmers in other countries will respond to high prices and plant bigger crops. He predicts higher production will lower corn and soybean prices worldwide and tamp down land values.

Rising land prices and continuing volatility of commodity prices top the list of financial planning factors for farmers to consider as the beginning of another year approaches.

Survey participants were asked to estimate average values of farmland as of September. The estimates are for bare, unimproved land with the sale price on a cash basis. Pasture and timberland values also were requested as supplemental information.

Southeast Iowa, which the land institute outlines as 11 counties: Jefferson, Henry, Wapello, Des Moines, Davis, Van Buren, Lee, Mahaska, Keokuk, Louisa and Washington — reports high quality crop land was valued at $9,827 per acre, which is the second lowest value of the nine Iowa regions. Only South Central Iowa was valued lower — at $7.822 per acre for high quality cropland.

Southeast’s region had medium quality crop land valued at $6,850 per acre and low quality crop land was valued at $4,068 per acre, for an average of $6,915 per cropland acre in the Southeast.

The average value per acre in all Iowa was $10,445 per acre for high quality cropland; $7,877 for medium quality cropland; and $5,314 for low quality cropland.

The region with the highest value for cropland is Northwest Iowa, according to the land institute survey. Northwest includes 12 counties: Lyon, Osceola, Dickinson, Emmet, Sioux, O’Brien, Clay, Palo Alto, Plymouth, Cherokee, Buena Vista and Pocahontas. High quality cropland was valued at $11, 908 per acre; $9,431 for medium quality cropland per acre; and $6,219 per acre for low quality cropland.

Southeast Iowa’s non-tillable pastureland was valued at $2,165 per acre in September and $1,795 per acre for timberland.

Land prices also increased in other Midwest states.

“Farmland price increases are on a par with the most dramatic seen in the last 50 years,” said Bill Davis, chief credit officer with Farm Credit Services of America.

FCS America is the leading agricultural lender in its four-state area, which includes Iowa, Nebraska, South Dakota and Wyoming.

Davis said the current large increases in farmland prices – in the range of 200 to 300 percent during five- and 10-year timeframes – are driven by three factors: strong domestic and export demand for commodities, historically low interest rates and very strong net farm income from cropping enterprises.

“We believe at least two of these three factors will reverse over the next three to five years,” he said. “The most likely event is a significant reduction in net farm profit levels as we see supplies respond to higher demand levels for commodities.”

Interest rates also are likely to increase eventually, making alternative investments more attractive than they have been recently.

“In short, over the long term farmers won’t be as profitable as they have been and that will affect the prices they are willing to pay for farmland,” said Davis.

Even if farmland prices do drop somewhat in the future, Davis said his company believes most producers are in a position to weather a moderate decline.

“Most of the farmland value increases we’ve seen over the past seven years appear to be supported by long-term domestic and world demand for agricultural commodities, ” he said. “Most buyers are farmers and they generally are in a very strong financial position.”

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