Iowa farmland values fall for third consecutive year

The Iowa State University Land Values Survey, released Tuesday, estimates that Iowa farmland prices as of last month averaged $7,183 per acre, a 5.9 percent — or $449 per acre — decline from last year.

That comes after farmland values fell by 3.9 percent and 8.9 percent in 2015 and 2014 respectively, from a historic peak of $8,716 per acre in 2013.

This year’s drop was most pronounced in Iowa’s high quality farmland, the value of which has fallen by 6.5 percent since November 2015, compared with a 5.9 percent drop for medium quality farmland and a 3.5 percent decline for low quality farmland, according to the study.

Only low-quality land in Southwest and South Central Iowa experienced an increase in value last year, according to the report.

“For a pessimist, there are reasons to worry, especially for landowners and/or producers who are over-leveraged,” said Iowa State University assistant professor of economics Dr. Wendong Zhang, who led the study. “For an optimist, this decline is still modest and the probability of a replay of the 1980s farm crisis is low.”

Conducted annually since 1941, the Land Values Survey compiles data from actual land sales and input from 518 respondents including appraisers, farm managers, agricultural lenders and others.

It provides information on general land value trends and price relationships based on valuations for 711 low, medium and high-quality farmland properties spread across Iowa’s 99 counties.

Among the factors putting pressure on farmland prices in 2016 were low commodity prices, high input costs and weak cash rent rates, according to respondents. Low interest rates, strong yields and limited land supply were the most commonly cited positive factors.

Existing local farmers were the most common buyer of Iowa farmland in 2016, scooping up 72 percent of land sales, while private investors were next in line with 22 percent.

Estate sales were the most common type of sale, accounting for just over half of all farmland dispositions. Retired and active farmers were the sellers of a combined 35 percent of sales and private investors accounted for just nine percent.

Zhang wrote that some solace could be found in the fact that the 5.9 percent drop revealed in the report was lower than had been expected by some, and that many farmers have saved enough to pay down debt in a way that will increase their resiliency.

“Most farmers will be able to weather the storm as the market prices find a new equilibrium, but farmers and landowners who bet on the high commodity prices lasting and aggressively expanded or borrowed heavily will face significant problems in the months ahead,” Zhang wrote.