Stabilizing. That’s the call for the Iowa farmland market from several hundred land professionals at the recent Iowa State University (ISU) Soil Management and Land Valuation Conference. Since 1964, attendees at the conference have projected average land values for the end of the year and into the future. Attendees include real-estate brokers, farm managers, farm operators, farmland investors and farm lenders. Their responses include a wide range of optimistic and pessimistic projections.
This year’s poll finds attendees looking for a statewide average farmland price of $7,863 an acre by year end—essentially no change from their opinion in 2016. In addition, they project a statewide average farmland price of $7,849 an acre by the end of 2018, also a similar prediction from last year. This translates into two years of basically no change in the average value of an acre of Iowa farmland. That’s a sign this group of land pros sees the state’s farmland market stabilizing after declining from its 2013 highs.
The group also expects values will edge higher after 2018. They project an average acre of Iowa farmland to rise by nearly 6%, reaching $8,307 an acre by 2020. They expect that uptrend to continue, projecting values will rise to $9,632 an acre (a 22.5% increase) by 2025, and surge to $12,841 an acre (a 63% increase) by 2040.
Cash Rents Decline 5%
Iowa cash rental rates decreased 4.8% in 2017, according to the annual Iowa Land Value Survey of farm operators, landowners, ag lenders and professional farm managers by ISU. The survey found the statewide average cash rent declined to $219 an acre for 2017, marking the fourth consecutive year of decreases.
This year’s average is down 18.9% from the high of $270 an acre marked in 2013 (see chart below). The percentage decrease nearly matches the cumulative 17.4% decline in the value of farmland reported in the 2016 Land Values Survey.
The 18.9% decline from the record high is only a third of the cumulative decrease in the price of corn from the 2012/13 high to current prices, notes ISU Extension Economist Alejandro Plastina. This year’s average is $5 higher than the $214 statewide average found in the 2011 survey.
Although values declined on average, the southeast crop reporting district reported a 1.5% increase in average cash rent to $204 an acre. The north-central district posted the steepest decline for all districts of 10.3% to $218 an acre, down from $243 a year earlier.
On a land-quality basis, cash rent for high-quality cropland declined 5%, from $270 an acre in 2016 to $256 an acre in 2017. The average cash rent for high-quality cropland is down 21.9% from the 2013 high.
Medium-quality land decreased 4.6%, from $230 per acre in 2016 to $220 in 2017, and is down 18.9% versus 2013. Low-quality land experienced a 4.4% decline, from $191 per acre in 2016 to $183 in 2017, accumulating a 13.9% decline since 2013.
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