New Record $26,000/Acre Iowa Farmland Sale, Record Amount of Land Could Flood Market in Next 60 Days

Farmland values are on a historic run. After a record sale of $22,600 per acre in August, October came with a new record price as a piece of farmland in Johnson County, Iowa, brought a record $26,000 per acre. However, one land appraiser expects a record amount of land to enter the market in the next 60 days, as higher prices are enticing more sales.

Record Sale

The $26,000 sale was Parcel 2 in the auction and consisted of 76 acres. Jim Rothermich, a farmland real estate appraiser with Iowa Appraisal and Research, says the sale was conducted by Hertz Real Estate, and the buyers willing to pay top dollar were investors. Rothermich described the sale as one with a huge crowd and aggressive bidding, with plenty of buyers bidding on the land this week. Parcel 1 in the same sale, which was also close to 76 acres, brought $21,000.

What. A. Sale.?

SOLD!
151.68 Acres, m/l, Johnson County, IA

Click here for more info: https://t.co/KNPVo1cEvn pic.twitter.com/kREAaCgg42 — Hertz Farm Management (@HertzAgLand) October 6, 2021

Investor Interest

While the record sale will turn heads, Rothermich says a farmland sale last week drew attention for different reasons. While the three parcels of land sold at that sale brought just over $14,000 per acre, it’s how it was sold that is drawing interest.

“Well this farm was one solid section that was offered for auction in Dickinson County, Iowa,” he says. “And I've never seen one whole section of 640 acres get offered an auction, and this farm did. It was broke up into four quarter sections and it was offered as choice with privilege.”

Not often does a whole section of land go to auction. Sold!!! $9.14+ million or Tract 1- $14,600/acre; Tracts 2-3 purchased as a unit- $14,800/acre; tract 4- $14,000/acre; same buyer on all tracts; section stayed together. pic.twitter.com/3QXM3GPCyH — Jim Rothermich, MAI, ARA, ALC (@theLandTalker) October 1, 2021

Typically when offered at privilege, if a buyer is interested in other parcels of land at that sale, they can take whatever track they want. Instead, Rothermich says this investor buyer let the bidding process play out, taking all four parcels and saving $32,0000 in the end.

“It’s incredibly rare, and I was totally shocked that that section stayed together,” he adds. “If that farm was sold a year ago I would estimate the price range would have been between $9,000 and $10,000 an acre. Those are not top prices here in Iowa, but those are very strong prices and for that section to stay together is truly amazing. And there was a lot of competition on that from investors and farmers on that tract of land so very, very amazing. And then for one buyer to be able to swing over a $9 million deal, that's pretty huge in my opinion.”

Farmland Values Could Level Off

As more investors enter the market, and farmers also remain aggressive in buying land, historic prices have partially been driven by the fact there are more buyers than sellers for farmland right now. However, Rothermich says that’s a changing situation, as he expects a record amount of land to flood the market in the next 60 days.

“These higher prices are driving more acres to auction, and we're seeing over two times the amount of auctions coming to market right now in the next 60 days,” he says. “I would argue we're going to see more farms sold than we maybe ever have. There's that many auctions coming. And that's starting to kind of level things out. And we still have a very strong market. But those amount of acres coming to market in the next 60 days are leveling things out.”

Rothermich says as more land comes up for sale, that could plateau the bull run in land values for now. As a result, what he describes as “the intensely aggressive market conditions” that farmland values have seen the past six to eight months may be tapering off. But he thinks record prices will still be paid in some areas, even with more land coming to market.  

“I do expect to see some record-high prices in an area where nothing ever comes up for sale and the locals have strong equity positions, there will be some price record still in this environment,” he says.

Rothermich says strong farmland values aren’t going away, as he thinks farmland values will continue to see support into 2022. With strong yields and grain prices still above break-even, farmers will compete for land, as will investors who are being drawn to farmland due to factors like inflation.

The Overall Farmland Value Picture

According to Farmer Mac’s The Feed Fall Edition, USDA shows overall farm real estate values in the U.S. are up 7% compared with 2021. Jackson Takach, Farmer Mac economist, says when you adjust for inflation, farmland returns are still on solid footing and viewed as a safe investment.  

“Farmers all the way to institutional investors look at farmland as a good hedge to inflation. Historically, it has been like most real assets — it has performed very well against rising inflation when in an inflationary environment,” Takach says. “That's certainly at play today when people think about a good safe storage for the U.S. dollar in a higher price environment. Farmland is part of that discussion, as it should be.”

Takach says the rate at which real estate values have increased from 2020 is a quicker pace in the Western Corn Belt compared with the East. States such as Nebraska and Kansas are seeing farmland values up more than 10%. Iowa’s values increased 9.5% while Illinois, Indiana and Ohio are seeing farmland values rise at a slower rate.