Grain Belt Farmland Values Jump 7.5% in 6 Months
Farmland values continue to increase and are nearing levels not seen in eight years, according to a recent report from Farm Credit Services of America (FCSAmerica).
Building on the gains that followed the 2020 harvest, farmland values in Iowa, Nebraska, South Dakota and Wyoming are being supported by low interest rates and the renewed optimism of higher grain prices and farm income.
The July 2021 FCSAmerica farmland value report is based on 63 farms spread across its four-state territory. Of those farms:
- 53 increased in valued
- 8 saw no change
- 2 declined
On average, values were up about 7.5% in the first six months of 2021.
Iowa saw the greatest overall gains. Twelve benchmark farms are valued at more than $10,000 per acre, including a central Iowa farm with a 34% gain in 2021 for a per-acre value of $13,200. A year ago, only five farms were valued in excess of $10,000 per acre. Iowa farmland is only 7% shy of its 2013 peak, and the real estate market remains active.
A week after the completion of FCSAmerica’s July benchmark report, six bare land farms in central Iowa sold for a low of $14,200 to a high of $16,800 an acre.
“As anticipated, the substantial runup in farm profitability has resulted in increased farmland values on the whole,” says Tim Koch, chief credit officer for FCSAmerica. “But we also saw significant differences in values at the local level based on market activity, including the number of sales and land availability.”
The two benchmark farms that lost value, for example, were in Nebraska. Yet in the south-central area of the state, values were up an average of 15% in the first half of 2021 and are approaching historic highs. Statewide, Nebraska farmland is 15% behind its peak value of 2013.
Those areas that saw little change in value also tended to have a higher concentration of pastureland. In South Dakota, where values are 11% behind the market peak, only pastureland saw no gain.
As cattle operators focus on retaining cash, pastureland values will likely see continued price pressure in coming months, Koch says.
While drought is impacting crops in areas of FCSAmerica’s territory, it is unlikely to be a drag on cropland values. Strong crop insurance price levels will offset drought-related production losses. The majority of grain operators are expected to be profitable again in 2021 and interest rates remain favorable, Koch says: “The outlook for real estate looks pretty strong.”
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