The value of an average acre of Iowa farmland rose 5.1% for the year ending in November, according to the annual Iowa Land Value Survey conducted by Iowa State University. The survey says the average value of an acre of Iowa farmland reached $8,716 an acre, an increase of $420 an acre. Values increased in 2013 for the fourth year in a row, posting another historical high in the process.
This year's single-digit rise is the ninth time in the past ten year that land values have increased, reports survey coordinator Dr. Mike Duffy. "Except for 2009, the 2013 increase is the first time value have increased less than by double digits since 2003. This is only the second time in the past ten years where some counties reported lower land values than the year before. In 2009, 85 counties reported lower values and in 2013 there were 14 counties that reported lower land values. Except for 2009 and 2013, since 2004 all county land values have increased each year, Duffy states.
Duffy indicated farmland values tended to follow the decline in commodity prices which occurred from min-summer forward. "I suspect that most of this 5.1% increase was posted early in the year," he comments. "The 2013 land value survey shows a market in flux, with strong and weak prices occurring at the same time," he continues. "The key question is if this shows the market is going to settle, if it is just pausing before another takeoff in values or if the market has peaked and due for a correction."
Because commodity prices have adjusted downward dramatically since a year earlier due to a strong build up in carryover supplies, Duffy looks for commodity prices to remain under pressure and for land values to adjust accordingly. "If we follow the normal trajectory of prices adjusting to higher yields and a rise in supplies, then we will see land values adjust by 20% to 30% over the next five years," he says. "But the key is will we have a 'normal trajectory' with the strong demand coming out of Asia and the extremely weird weather we've been experiencing. My hunch is weather will continue to be 'weird' and that may offset some of that normal trajectory."
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