Iowa farmland value continue going up
According to the Iowa Land Value Survey conducted in November, Iowa farmland values are averaging $8,716 an acre, which is an increase of 5.1 percent from 2012.
“The 2013 land value survey shows a market in flux, with strong and weak price sales occurring at the same time,” said Michael Duffy, Iowa State economics professor and extension farm management economist who conducts the survey, in the press release from the Iowa State University Extension and Outreach. “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.”
This continuing increase in farmland value surprises Washington County farmer Jim Cuddeback.
“I’m surprised farmland values keep going up with the lower grain prices,” Cuddeback said, “but the cattle and hog prices are still pretty high.”
According to the press release, there was a 33 percent drop in the average corn price in Iowa from October 2012 to October 2013. November’s Iowa corn price was estimated to be 39 percent lower than the price from November 2012. There was also an 11 percent drop in soybean prices over the same time period.
The increase in demand for farmland in Iowa has helped the farmland values, Cuddeback said.
“They say the farmland values are going to keep increasing as people keep trying to buy it,” Cuddeback said. “But there’s just so much acres of farmland available.”
As the demand increases for farmland it will be harder for younger farmers to get their start, Cuddeback said.
“I don’t know how a young farmer can buy land,” he said. “Most of the farmland in Washington County is being bought by established farmers. Maybe if the young man has a farming family and his farming family uses some of their land for a loan for him to get starte—but otherwise it would be pretty hard.”
The value of farmland has not always been this high.
“I can remember in the ‘80s when the farmland wasn’t quite as good of an investment,” Cuddeback said. “Then in the ‘90s the value of farmland began to increase.”
One thing that has helped spur the increase of farmland prices is the lower interest rates that are available, which has helped farmers with their costs, Cuddeback said.
“If you can get a loan at 4 percent, instead of 8 percent, that’s half a loan payment,” he said. “Most farmers when they buy land, they hope to pay it off in 20 years.”
In Washington County, the average price per acre of farmland is $9,105, according to the survey. The survey is sponsored by the Iowa Agriculture and Home Economics Experiment Station at Iowa State University The survey is based off of reports from real estate brokers and individuals who have considerable knowledge of land market conditions. There were 476 responses to the 2013 survey, which provided the 674 land value estimates.