The scales have tipped for Iowa farmland values. After several years of dramatic increases, this year marks a drop in value.
For 2014, the average value of an acre of Iowa farmland is $7,943—a drop in value of $773, or nearly 9%, per acre from 2013.
“This the sharpest decline since 1986,” says Mike Walsten, editor of LandOwner newsletter.
But, Walsten says, you should keep these numbers in perspective. “The value of Iowa farmland is still double what it was 10 years ago,” he says.
While this year marks the largest decline in farmland values in 28 years, it is only the second year since 1999 that the survey has shown a decline in farmland values. After hitting a historic peak in 2013, values have returned to a mid-point between 2011 and 2012 values. In spite of the decrease, farmland values remain 81% higher than 2009 values, and 18% higher than 2011 values.
“I think we have seen a peak for the time being,” said Michael Duffy, said in a release about the survey. “Commodity prices and farm income are settling back to more expected levels, and I think land values will probably move sideways for a while.”
For the second year in a row, Scott and Decatur counties reported the highest and lowest farmland values, respectively. Scott County’s farmland is valued at $11,618 per acre, while Decatur County reported a value per acre of $3,587.
“Scott County typically has the highest value primarily due to the location on the (Mississippi) river and good soil,” says Duffy, a retired ISU economics professor and extension farm management economist.
The value of all grades of farmland fell, with high-grade farmland taking the largest hit and losing a full 9% ($974 per acre) of its value.
“The reason high-grade farmland fell in value faster than low- or medium-grade farmland is because it had increased in value faster over the past few years,” Duffy says. Medium- and low-grade farmland fared slightly better, losing 8.5% ($688 per acre) and 7.9% ($420 per acre), of their values, respectively.
The only crop reporting district to show an increase in values was southeast Iowa, which reported values at 3.2% higher than last year.
Corn and soybean prices started falling in 2013, and as a result farm income dropped. The most recent USDA net farm income estimate showed a record high income in 2013, but a 23% drop in net farm income for 2014. Falling commodity prices, along with a drop in farmland value, could make problems for some farmers.
“The drop in farmland value is due to the drop in commodity prices,” Duffy says. “Pressure could come if farmers incurred debt in anticipation that commodity prices would continue. I think all farmers will have a cash flow problem for the next 18 months or so. If farmers still have equity in their land they should be able to refinance, but farmers who got over extended will be in trouble.”
The survey is based on reports by 428 licensed real estate brokers and selected individuals considered to be knowledgeable of land market conditions. Since 1941, Iowa State University has conducted an annual land value survey to collect and analyze information on land values in each of Iowa’s 99 counties.
Find additional resources, including maps and historical survey data.
For more, read ISU Survey: Iowa Farmland Values Decline 9% in 2014
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