Despite the ongoing downturn in the ag economy, Iowa farmland values rose 2.3% in 2019. The annual Iowa Land Value Survey conducted by Iowa State University and released in December shows the statewide average value of farmland is estimated to be $7,432 an acre, a rise of $168 over 2018. This is only the second time in the past six years that Iowa land values have increased.
Low interest rates, better-than-expected crop yields and a limited amount of land available on the market helped drive values up slightly despite low commodity prices, says Wendong Zhang, ISU economics professor in charge of the survey. He cautions that this recent rise is more of a sign of stabilization than of a rally in farmland prices.
Iowa’s average farmland values are still about 15% below the 2013 high of $8,716 per acre, the survey shows. That’s a smaller decline than the drop in Iowa farm income, which dropped 33% from 2013 to $5.6 billion last year.
The 2.3% increase in land value for 2019 represents a statewide average of low-, medium- and high-quality farmland. “This reprieve in the land market, unfortunately, is not driven by a much stronger economy,” Zhang says. “We are still faced with uncertainty, especially in the ongoing U.S.-China trade war, which has significantly affected U.S. ag exports, especially soybean exports, and led to lower commodity prices and weaker farm income.”
Not a solid rebound
While the growth in land values is a positive sign, he says it shouldn’t be labeled as a “solid rebound” of the land market. “USDA’s Market Facilitation Program payments helped soften the blow and stabilize farm income and the land market. However, the future of the farmland market still hinges on the pace and speed of Federal Reserve moves on interest rates, progress in the trade talks and availability of land parcels.”
The U.S. saw 580 farm bankruptcies in 2019, the highest number since 2011. While Zhang says the overall share of bankrupt farms is still considered to be low, “there are more farms under financial stress due to continued low commodity prices.”
The growth in Iowa land values was noticeably higher this year in the central crop reporting districts. “The central districts saw larger increases than other areas of the state due in part to stronger-than-expected crop yields the past few years and strong urban demand for land. Also, strong recreational demand has helped lift the value of low-quality land.”
Land values by county
In the survey, 82 of Iowa’s 99 counties reported higher land values; the remaining 17 all saw a decline. For the seventh consecutive year, Scott and Decatur counties reported the highest and lowest values, respectively. Decatur County at $3,586 per acre had a gain of $97, or 2.8%. Scott, at $10,837 per acre, gained $300, or 2.8%.
2019 IOWA LAND VALUES: The average value of farmland across Iowa showed a slight uptick in 2019, for only the second time in the last six years, according to ISU’s annual survey. (Source: ISU CARD)
Both Boone and Story counties reported the largest percent increase at 5.4%. Story County saw the largest dollar increase by county at $455 per acre. Clay and Allamakee counties reported the largest percent decrease; both had a 2.2% loss since 2018. Clay County reported the largest dollar decrease in value at $151 per acre.
Land values by district
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. 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%). The losses in the northeast district are due mainly to financial stress in the dairy sector.
The largest percentage increases were in the east-central and central districts at 5.9% and 5.5%, respectively. However, the south-central and southeast districts also reported substantial increases at 3.6% and 3.8%, respectively.
Land value by quality
Low-quality land statewide now averages $4,759 per acre, a 3.3% or $150 per acre increase; medium-quality land now averages $6,938 per acre, an increase of 2% or $133 per acre; and, high-quality land now averages $9,078 per acre, an increase of 2.4% or $215 per acre.
Low-quality land in the central, east-central and west-central districts all saw increases of 5% or more, but low-quality land in the northeast district was a 5% 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 land. High-quality land in the northwest district is the only other high-quality land that saw a decline in value.
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, weather and tariffs on ag commodities. Zhang says potential buyers will continue to closely monitor the ag trade situation as they consider farmland acquisitions in the next year or two.
A number of Iowa farmers had stronger-than-expected yields despite record rainfall that prevented 463,339 acres from being planted in 2019. It was the most prevented planting acreage since USDA began reporting that category of data in 2007. Iowa corn yields in 2019 are estimated to be 192 bushels per acre, down only 4 bushels from 2018, according to USDA. Soybean yields at 53 bushels per acre are down 3 bushels from 2018.
Federal farm aid has helped improve farm income, but farm families are still under financial stress due to low commodity prices, Zhang says. The Trump administration in 2018 began spending $28 billion in Market Facilitation Program payments to offset price drops due to trade disputes with China and other countries. In the first rounds of MFP payments, Iowa farmers received about $1 billion. So far in the second round, Iowa farmers have received $767 million, according to USDA.
The ISU Land Value Survey was conducted in November by the Center for Agricultural and Rural Development (CARD) and ISU Extension. Results from the survey are consistent with results by the Federal Reserve Bank of Chicago, the Realtors Land Institute and USDA surveys. The ISU survey was initiated in 1941, the first in the nation. The survey is typically conducted every November and results released mid-December. Only the state average and district averages are based directly on ISU survey data. The county estimates are derived using a procedure that combines the ISU survey results with data from the U.S. Census of Agriculture.
ISU’s Land Value Survey is based on reports by ag professionals knowledgeable of the land market such as appraisers, farm managers and ag lenders. It is intended to provide information on general land value trends, geographical land price relationships, and factors influencing the Iowa land market. For the 2019 survey 59% of the 553 respondents answered the survey online. CARD offers a web portal at card.iastate.edu/farmland that includes visual tools, such as charts and interactive county maps, allowing users to examine land value trends over time at county, district and state level.
Source: Rod Swoboda, Wallaces Farmer
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