Iowa farmland average value shows modest growth in 2019
According to Iowa State University, it’s been a difficult year for farmers — the planting season saw an overabundance of rain and delayed planting, the United States’ trade war with China persisted, skewing both commodity prices and demand, and farm bankruptcies rose to the highest level since 2011.
However, favorable interest rates, strong yields, and limited land supply combined to help drive Iowa’s average farmland values up for only the second time in six years.
The statewide value of an acre of farmland is now estimated to be $7,432, which represents an increase of 2.3 percent, or $168, since 2018. The $7,432 per acre estimate, and 2.3 percent increase in value, represents a statewide average of low, medium, and high quality farmland.
Land Values by District
Land values across districts saw an increase in general, with only the Northeast district reporting a decline in land values (a loss of 2.9 percent). The losses in the Northeast district are due mainly to financial stress in the dairy sector.
The Northwest district reported the highest overall land values at $9,352 per acre, and the South Central district reported the lowest overall land values at $4,487 per acre.
The largest percentage increases were in the East Central and Central districts at 5.9 percent and 5.5 percent, respectively. However, the South Central and Southeast districts also reported substantial increases at 3.6 percent and 3.8 percent, respectively.
Land Value by Quality
Low-quality land statewide now averages $4,759 per acre, a 3.3 percent, or $150 per acre, increase; medium-quality land now averages $6,938 per acre, an increase of 2.0 percent, or $133 per acre; and, high-quality land now averages $9,078 per acre, an increase of 2.4 percent or $215 per acre.
Low-quality land in the Central, East Central, and West Central districts all saw increases of 5.0 percent or more, but low-quality land in the Northeast district was a 5.0 percent decline.
All qualities of land in the Northeast district reported a loss, while low-quality land there saw a greater loss than did higher quality lands. High-quality land in the Northwest district is the only other high-quality land that saw a decline in value.
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“The reprieve in the land market, unfortunately, is not driven by a much stronger farm economy,” said Wendong Zhan, an assistant professor of economics at Iowa State University who is responsible for leading the annual Iowa Land Value Survey. “This recent modest increase in land values reflects a lower interest rate environment and slowly improving U.S. farm income. However, we are still faced with significant uncertainty, especially the ongoing U.S.-China trade war, which has significantly affected U.S. agricultural exports, especially soybean exports, and lead to lower commodity prices and weaker farm income,” Zhang said. Stronger than expected crop yields in Iowa, and continuing limited land supply helped contribute to the increase in land values, despite low commodity prices.
While the growth in land values is a positive, Zhang warned that it should not be labeled as a “solid rebound” of the land market. “The Market Facilitation Program payments helped soften the blow and stabilize farm income and the land market; however, a no-deal or further escalation of the U.S.-China trade war on Dec. 15 will further amplify trade uncertainties and put downward pressure on farm income and land values,” Zhang said. “The future of farmland market still hinges on the pace and speed of Federal Reserve moves on interest rates, progress in the trade talks, and the availability of land parcels.”
The United States also saw 580 farm bankruptcies in 2019, the highest number since 2011. However, Zhang said that the overall share of bankrupt farms is still low, “but there are more farms under financial stress due to continued low commodity prices.”
Zhang said the growth in Iowa’s land values was noticeably higher this year in the central crop reporting districts (district hereafter). “The Central districts saw larger increases than other districts due in part to stronger-than-expected crop yields over the past few years and strong urban demand.” He also noted that “strong recreational demand” has helped lift the value of low-quality land.
Factors Influencing Land Values
Favorable interest rates, strong yields, and limited land supply were the most frequently noted positive factors influencing land values. The most commonly cited negative factors influencing land values were lower commodity prices, the weather, and tariffs on agricultural commodities.
Land values were determined by the 2019 Iowa State University Land Value Survey, conducted in November by the Center for Agricultural and Rural Development (CARD) at Iowa State University and Iowa State University Extension and Outreach. Results from the survey are consistent with results by the Federal Reserve Bank of Chicago, the Realtors Land Institute, and the US Department of Agriculture.
