Ag land values dropped in ‘24, but there’s no need to panic

WASHINGTON - A handful of studies made waves at the end of last year, reporting a drop in Iowa’s average farmland values for the first time in half a decade.

The decrease was fairly minimal, according to an Iowa State University Extension Study published in December, averaging 3.1% statewide from November of 2023 to the same time in 2024. While that’s hardly a major shift in the market, the finding disrupted five consecutive years of upward momentum in the asking price of agricultural ground.

“The 2024 Iowa State University Land Value Survey reported a 3.1% decrease to $11,467 per acre for average Iowa farmland values,” wrote Rabail Chandio, an ISU Extension Economist, in a summary of the organization’s annual Farmland Value Survey. “The plateauing land values from 2023 are now on a modest decline, with most counties and regions experiencing a relatively small adjustment.”

While the trend’s reversal is noteworthy, area ag finance professionals said they were unsurprised by the finding. While some investors hoped the resource would continue to grow faster than lower-risk options, CBI Bank Washington County President Matt Brown said a slowdown was always a question of “when,” not “if.”

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“It’s expected, with the significant increase in the value of farmland ground over the last five years, a retraction is inevitable,” he said. “A lot of investors were buying ground. The return on investment was not good, but it was better than a CD, and considered similarly safe, because farm ground is tangible and fairly steady in value.”

While there’s little concern over the 3.1% decrease itself, some worry about the wider picture it illustrates.

Consensus from farmers, economists and moneylenders is that several issues played a part in farmland’s slight decline in value, but the factor most frequently cited by experts was commodity prices. Corn and soybean growers have faced a tough year in terms of market rates, thanks in part to favorable growing-season weather that boosted yields and rocketed grain supplies.

“If you look at the price of corn and follow what those prices have been in the past, compared to now, it reconciles fairly closely,” said Willie Bender, Farm Credit Services of America’s Southeast Iowa regional vice president of lending.

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The takeaway for most farmers, then, has little to do with land values themselves.

While the changing numbers might impact debt-to-equity ratios needed to secure loans, or even assessed property value for taxes, the change of around 3% is more or less negligible, according to Brown and Bender.

But the changing land values point to another problem: asking prices fell because farms were less profitable in 2024. Even as grain prices fell, inputs like fertilizer and combines stayed pricey, and producers faced tighter margins as a result.

“What’s important for our local area farmers is to understand is their own cash flow, and how much it costs to produce their crop that they are putting in the ground each year,” Bender said. “If agriculture is profitable, land values will level off ... but the bigger thing is making sure your own operation is as profitable as possible.”

Jeff Cuddeback is a farmer in Washington County and a certified general appraiser. He said he saw most of last year’s price drop happening early in 2024, with numbers leveling out as the months went by.

While the roughly 3% difference matters little to most producers, he said the changing market was already impacting operations as they sought to shrink or expand. For those selling land, some early-year auctions saw lots go without bids as demand dried up.

For those looking to expand, the downturn could make doing so marginally easier in terms of asking prices, assuming it doesn’t affect their own equity, which can influence their ability to acquire loans.

For the rest, however, study’s like ISU’s simply confirm that the market is responding to to reality.

“Do I care, today, that the value of my farmground is 3% less than it was a year ago? No, I would only care if I were considering selling,” Cuddeback said. “It’s not going to change my operation at all on a day-to-day basis.”

Comments: Kalen.McCain@southeastiowaunion.com