Iowa farmland values rise for first time since 2013

The 2 percent increase in Iowa farmland values over the past year represents a temporary break in their continued downward trajectory, according to the Iowa State University professor who led an annual land value survey released Tuesday.

Conducted since 1941, the Iowa State Land Values Survey incorporates responses from 710 agricultural professionals and data on 877 land value estimates for properties spread across the state’s 99 counties.

This year’s survey showed an average price of $7,326 per acre across classes of low-, medium- and high-quality farmland, a $143-per-acre increase from last year’s survey. That rise is the first increase in average values observed since the survey hit a peak of $8,176 per acre in 2013.

Analysis accompanying the survey said that respondents attributed the increase to low interest rates, limited land supply and strong yields.

“I would not consider this a turn of the land market,” Dr Wendong Zhang, the survey’s lead researcher said in a statement. “Given the rising interest rates and stagnant farm income, I would not be surprised to see a continued decline in values in the future. This, to me, is a temporary break in a downward adjustment trajectory.”Existing farmers represented 72 percent of farmland buyers in Iowa over the past year, according to the survey, which showed investors’ share of the market to have held steady from last year at 22 percent. Investors were most active as both buyers and sellers in South Central Iowa, which also had the lowest average farmland price at $4,172 per acre according to the survey.

“While 20 percent of Iowa farmland is mainly owned for family of sentimental reasons, the strong robust returns have and will continue to attract interested farmers and investors to invest in the farmland market,” Zhang wrote.

In an analysis, Zhang highlighted repeatedly the role that limited supply has had on the farmland market in Iowa over the past four years, during each of which a majority of survey respondents reported less sales activity in their counties than the previous year. Only one-fifth of respondents reported an increase in the pace of sales activity in their counties last year, according to the survey.

Looking ahead, Zhang wrote that 83 percent of respondents expect an increase in land values five years from now, echoing notes of medium-term optimism expressed by producers in the latest monthly Purdue University / CME Group Ag Economy Barometer.

Zhang wrote that half of Iowa farmland has been held for more than 20 years and predicted that in the near term, farmers are likely to continue to resist mounting pressure from declines in profitability and income.

“The heightening farm financial stress is already putting pressure on some vulnerable producers to liquidate some of their assets,” Zhang wrote. “A large influx of farmland supply is not likely, but this potential rise in farmland sale activity and continued declined in farmland values might present opportunities for beginning farmers and ranchers to enter the market.”