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Iowa Land Values Rise in 2019
Iowa’s farmland values rose in 2019, despite delayed planting, a wet harvest, a trade war with China, low commodity prices, and farm bankruptcies at the highest level since 2011.
The annual Iowa Land Value Survey, conducted by Iowa State University, shows that the statewide value of an acre of farmland is now estimated to be $7,432, an increase of 2.3%, or $168, over 2018. This is the second time in the past six years that Iowa land values have risen.
Favorable interest rates, stronger-than-expected crop yields, and limited land supply combined to help drive values up, says Wendong Zhang, assistant professor of economics at Iowa State. Zhang leads the annual survey.
“The reprieve in the land market, unfortunately, is not driven by a much stronger farm economy,” says Zhang. “This recent modest increase in land values reflects a lower interest rate environment and slowly improving U.S. farm income. However, we are still faced with significant uncertainty, especially the ongoing U.S.-China trade war, which has significantly affected U.S. agricultural exports, especially soybean exports, and led to lower commodity prices and weaker farm income.”
Not a Solid Rebound
While the growth in land values is a positive, Zhang warned that it should not be labeled as a solid rebound of the land market.
“The Market Facilitation Program payments helped soften the blow and stabilize farm income and the land market; however, a no-deal or further escalation of the U.S.-China trade war on December 15 will further amplify trade uncertainties and put downward pressure on farm income and land values,” says Zhang. “The future of the farmland market still hinges on the pace and speed of Federal Reserve moves on interest rates, progress in the trade talks, and the availability of land parcels.”
The U.S. also saw 580 farm bankruptcies in 2019, the highest number since 2011, says Zhang. He considers the overall share of bankrupt farms low, “but there are more farms under financial stress due to continued low commodity prices.”
Zhang says the growth in Iowa’s land values was noticeably higher this year in the central crop reporting districts. “The Central districts saw larger increases than other districts due in part to stronger-than-expected crop yields over the past few years and strong urban demand.”
He also noted that strong recreational demand has helped lift the value of low-quality land.
Land Values by County
Eighty-two of Iowa’s 99 counties reported higher land values; the remaining 17 all saw a decline. Both Boone and Story Counties reported the largest percent increase at 5.4%. Story County also saw the largest dollar increase by county at $455 per acre.
Clay and Allamakee Counties reported the largest percent decrease – both showed a 2.2% loss since 2018. Clay County reported the largest dollar decrease in values at $151 per acre.
Land Values by District
The Northwest district reported the highest overall land values at $9,352 per acre, and the South Central district reported the lowest overall land values at $4,487 per acre.
Land values across districts saw an increase in general, with only the Northeast district reporting a decline in land values (a loss of 2.9%). The losses in the Northeast district are due mainly to financial stress in the dairy sector.
The largest percentage increases were in the East Central and Central districts at 5.9% and 5.5%, respectively. However, the South Central and Southeast districts also reported substantial increases at 3.6% and 3.8%, respectively.
Land Value by Quality
Low-quality land statewide now averages $4,759 per acre, a 3.3%, or $150 per acre, increase; medium-quality land now averages $6,938 per acre, an increase of 2.0%, or $133 per acre; and, high-quality land now averages $9,078 per acre, an increase of 2.4% or $215 per acre.
Low-quality land in the Central, East Central, and West Central districts all saw increases of 5.0% or more, but low-quality land in the Northeast district was a 5.0% decline.
All qualities of land in the Northeast district reported a loss, while low-quality land there saw a greater loss than did higher quality lands. High-quality land in the Northwest district is the only other high-quality land that saw a decline in value.
Factors Influencing Land Values
Favorable interest rates, strong yields, and limited land supply were the most frequently noted positive factors influencing land values. The most commonly cited negative factors influencing land values were lower commodity prices, the weather, and tariffs on agricultural commodities.
About the Land Value Survey
Land values were determined by the 2019 Iowa State University Land Value Survey, conducted in November by the Center for Agricultural and Rural Development (CARD) at Iowa State University and Iowa State University Extension and Outreach. Results from the survey are consistent with results by the Federal Reserve Bank of Chicago, the Realtors Land Institute, and the U.S. Department of Agriculture.
The ISU land value survey was initiated in 1941, the first in the nation, and is sponsored annually by Iowa State University. The survey is typically conducted every November and the results are released mid-December. Only the state average and the district averages are based directly on the ISU survey data. The county estimates are derived using a procedure that combines the ISU survey results with data from the U.S. Census of Agriculture.
The ISU Land Value Survey is based on reports by agricultural professionals knowledgeable of land market conditions such as appraisers, farm managers, agricultural lenders, and actual land sales. It is intended to provide information on general land value trends, geographical land price relationships, and factors influencing the Iowa land market. The 2019 survey is based on 679 usable responses from 553 agricultural professionals; 59% of the 553 respondents answered the survey online.
CARD offers a web portal that includes visualization tools, such as charts and interactive county maps, allowing users to examine land value trends over time at the county, district, and state level.