Iowa land values at a historic high

Farmland value in Iowa shot up almost 33 percent since 2010. That is the finding of the Iowa Land Value Survey conducted in November by Iowa State University (ISU). The survey indicated that the average farmland value in the state is about $6,700 per acre. Washington County?s estimated land value was above the state average at $7,170 per acre but had the smallest percentage increase of any county at 28.2 percent.

ISU economics professor and farm management economist Mike Duffy conducted the survey. Duffy said in a press release Wednesday that the 2011 figures are a high water mark for the state in a couple of respects. The average land value estimate of $6,708 per acre is the highest the average has ever been, even after adjusting for inflation. Not only that, the 32.5 percent increase over 2010 is the highest percentage increase in one year in the survey?s history, dating to 1941.

The previous inflation adjusted high for Iowa land values was in 1979.

The 2011 survey indicates what prior surveys have shown, which is that the highest valued farmground in the state is concentrated in northwest Iowa, with many counties reporting value in excess of $8,000 an acre. The northwest crop reporting district reported average land values of over $8,300. The county with the highest farmland value was O?Brien County in northwest Iowa which reported its average was $9,500 an acre. However, the county whose value rose the most was not in northwest Iowa but on the Mississippi River ? Scott County. Scott County?s estimated average farmland rose 37.7 percent to about $9,200.

Duffy said that the price of farmland is now so high that many people are worried it will become the next speculative bubble.

?Some people feel farmers are setting themselves up for a fall similar to the 1980s,? he said. ?Without a doubt, it?s an interesting time and something to watch, but it isn?t a time to panic.?

Duffy said that the high price of farmland can be explained by looking at gross farm income. The price of corn and beans has more than doubled in the past six years. In 2005, he said corn prices averaged $1.94 per bushel and by November of this year they averaged $6.05. In that same span, soybean prices jumped from $5.54 per bushel to $11.40. Duffy said the changes in commodity prices have driven the increase in value but they are not the only factor. Other factors include low interest rates and a poorly performing stock market that makes investing in farmland look even better.

Duffy said that many respondents to the survey noted the use of auctions has increased recently, and that preliminary analysis of 2011 sales shows that land prices rise when land is sold through an auction.

The survey is based on reports from people who are believed to be knowledgeable of land market conditions such as real estate brokers. The 2011 survey is based on 487 usable responses which provided 642 county land value estimates.