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Iowa farm land values 'stable' despite '09 decline

A decade-long climb in farm land values in Iowa is over.

That's according to the annual farmland values survey conducted by Iowa State University (ISU) Extension officials. The 2009 edition of the survey that tallies land values for each crop reporting district of Iowa was released Wednesday by Mike Duffy, ISU Extension economist.

Overall, the survey found Iowa land dippipng 2.2% from a year ago to $4,371 per acre. Though it's a negative result, Duffy says he previously guessed a statewide decline closer to 5%. And, that actually would have been the case, he says, had the survey been conducted on a different time frame.

"A negative number is never good news, but this is a decrease that's less than what I had anticipated," Duffy says. "It's important to remember that our survey covers from November to November, and I think most of the strength has been toward the last part of this year. If we would have done this several months ago, we would have seen a different result."

Despite the statewide decline, much of northwestern and some of east-central Iowa continued the value trend of years past; on the other hand, the central Iowa crop reporting district saw the sharpest decline at 5%.

While the trend is generally lower, Duffy says considering the economic pressures -- both on a macro level and specific to the ag sector -- the land market is "basically stabilized" for the time-being, Duffy says.

"We've reached a situation in my opinion where it's basically stabilized and we're just kind of waiting to see what's going to happen, not just in the ag economy, but in the economy as a whole," he says. "This is a stronger result than I'd anticipated. It's never good news when your assets decrease in value, but it's not as bad as it could have been. That's about the best way to look at it. Basically, I think we're in a holding pattern."

One key variable that was noticeably different in this year's survey is who has been buying the land. Much of the climb in land values in recent years has been predicated on the entrance of more investors to the market. This year saw that trend do a 180.

"Who purchased the farm land? We've asked this question the last 20 years. We were seeing existing farmers falling off as purchasers and the investor category increasing," Duffy says. "What we've seen this year is a change where more existing farmers came in and investors fell out. That trend is actually continuing...For the investor, there just isn't as much money to go around. Farmers, when times are good, tend to put money back into land."

Other key findings of this year's survey include:

  • 62% responding said there were fewer land sales in the last year than in the previous year, compared to 20% for the same variable a year ago.
  • Survey respondents named low interest rates, good grain prices and yields and limited land availability as factors positive to values.
  • Negative variables include lower grain prices, declining ethanol demand and higher input costs.
  • HIgher quality farm land is holding steady, value-wise, while lower quality, recreational land is "under a lot of pressure," Duffy says.

One ag lender responding to the survey put the Iowa farm land market's future best, Duffy says, when she said "the market was stable until we saw signs of change."

"It really does summarize this situation. There are a lot of factors that could come into play here," Duffy says. "There are a lot of concerns about the overall health of the farm economy, and questions about the state's finances and overall economy. And, all of these have potential to come into play."

But, a devaluation trend may not continue to build, farmers say. It would take a much sharper decline in grain prices -- which a lot of farmers see as the main driver behind bullish land values -- than what's happened in the last year.

"I don't think land will go down much more from here (though some are hoping for the buying opportunity) with this caveat that grain prices don't crater to near LDP levels," says Farm Business Talk member BA Deere.


A decade-long climb in farm land values in Iowa is over.

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