Fairfield Ledger

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Neighbors Growing Together | Sep 18, 2018

Farmland values rise 2 percent

By Andy Hallman, Ledger news editor | Jan 08, 2018
Photo by: MAP COURTESY OF IOWA STATE UNIVERSITY This map shows the average farmland value in a county for 2017 on top, and the average value for 2016 on bottom. Note that both Jefferson and Van Buren’s farmland values rose by a little over 1 percent.

Farmland values in Iowa rose slightly in 2017 after three straight years of declines.

According to Iowa State University’s 2017 Farmland Value Survey, the value of farmland rose 2 percent last year to an average of $7,326 an acre.

Land values have skyrocketed since about 2002, achieving double-digit percentage gains nearly every year until reaching as high as $8,716 in 2013, the highest in the state’s history even after adjusting for inflation. That was followed by value drops of 9, 4 and 6 percent, respectively, in the following three years. Landowners were happy to see that slide come to an end in 2017.

Land values in Jefferson and Van Buren counties rose modestly. Jefferson’s climbed 1.4 percent from $5,367 an acre to $5,442. Van Buren’s inched up 1.2 percent from $4,999 an acre to $5,061.

The numbers come from survey data submitted by 710 respondents throughout the state. Respondents include real estate brokers, farm managers, appraisers and other occupations knowledgeable about land values.


What’s impacting the values?

Most respondents listed factors influencing the land market. According to ISU Extension & Outreach economist Wendong Zhang, who compiled the study, the most commonly cited positive factors were low interest rates, limited land supply, strong yields, and to a lesser extent, strong demand.

The most commonly cited negative factor was low commodity prices, mentioned by 41 percent of respondents. High input prices and eroding cash and credit availability were also frequently mentioned.


Who is buying farmland?

Perhaps not surprisingly, most farmland is bought by other farmers. The survey found that existing farmers accounted for 72 percent of farmland buyers. Investors represented 22 percent, new farmers represented 4 percent, and other purchasers represented the remaining 1 percent.


Values climbing higher, or was 2017 an aberration?

Everyone involved in the ag economy is eager to find out if the 2017 bump in land values is a harbinger for further increases, or if it’s just a bump in a downward trend begun in 2014.

Zhang notes that 58 percent of respondents expect their county’s land value to rise again in 2018. However, Zhang sees other factors that suggest values will continue falling like it did from 2013-16.

“Given the rising interest rate and heightening farm financial stress across the Midwest, this recent bump could likely be just a temporary break in a continued downward adjustment in the farmland market,” he said.

Zhang noted that, while farmland values increased 2 percent in nominal dollars, they actually declined 0.2 percent after adjusting for inflation. Furthermore, data from the Iowa Farm Business Association shows more farmers are financially stressed, from 38 percent in 2014 to 47 percent in 2016. Also, land values in other Midwestern states such as Kansas, Nebraska, Illinois and Indiana all declined.

“There is no explicit reason to believe that Iowa’s land market has a fundamentally different dynamic than those of neighboring states, especially Illinois and Indiana,” Zhang said.


Price of inputs declining

Just as the price of corn and beans jumped by leaps and bounds throughout the 2000s, so, too, did the cost of inputs like seed, fertilizer and pesticide. Now that commodity prices have dipped in recent years, the price of inputs is falling, too. ISU estimated the cost of producing corn had dipped 12 percent to $3.51 per bushel, and the cost of herbicide resistant soybeans fell 9 percent to $9.56.

“Despite continued declines in commodity prices, the corresponding drop in production costs have resulted in break-even or positive production margin for many producers this year, which has a positive impact on farm income and asset values,” Zhang said.


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