Research & Data

Iowa farmland values strengthening: survey

Nearly one percent growth in average Iowa farmland prices seen over the past six months was not enough to counter the declines seen in the first half of the past year, according to a recent survey.

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Outback windmill and farmlands in rural Australia

Previously declining Iowa farmland values reversed course during the six-month period from September 2016 through February of this year, rising by nearly one percent, according to the Iowa Chapter Realtors Land Institute’s Land Trends & Values report.

The 0.9 percent price increase in tillable cropland during that period followed a 3.7 percent drop in values experienced during the previous six-month period, from March 2016 through August 2016, the report shows.

When combined, prices have fallen 2.8 percent over the past year, to an average price of $6,545 per acre.

“We really believe that we are in an area of strength right now due to the lack of farmland on the market and the amount of demand we have,” Kyle Hansen, the report’s author, told Agri Investor.

“But, we also believe that the true direction of the market is yet to be determined. We feel like [the market] is taking a breath to identify the future direction and that is going to be based on yields, what kind of world grain surplus we have, as well as the grain prices and net revenue of farmers.”

The report polled about 150 local farm appraisers, real estate agents and farm managers. Respondents reported that investors, defined as any buyer not planning to farm the land, accounted for 26 percent of buyers over the past six months.

“Recreational” land buyers, motivated by an interest in nature or hunting, are playing an increasing role in the market as well, according to the report, though Hansen declined to estimate the size of that role.

Dr. Wendong Zhang, who leads Iowa State University’s annual Land Values Survey, told Agri Investor that he believes limited land supply is supporting recent price increases and that improvements in the underlying farm economy are also playing a key role.

Citing the research of his Iowa State colleague Chad Hart, Zhang noted Iowa’s corn and soybean farmers have recently seen an improvement in their average profit margins — from negative returns to break-even pricing — for the first time since 2014, a key source of recent market strength.