Local farmland values increased 28.8 percent

A 65-acre Jefferson County farmland transaction recently brought more than $8,000 per acre, nearly twice the county?s annual survey price estimated for 2011.

?That particular land was twice as good,? said Bob Hayes, Fairfield farmland appraiser.

The sale price was well above the average price of farmland in Jefferson County as reported in the annual Iowa State University Land Value Survey of Nov. 1, and the U.S. Census of Agriculture estimate.

The 2011 average farmland value in the county is estimated in the surveys at $4,588 per acre, a 28.8 percent increase over the 2010 average price per acre of $3,569.

Generally, farmland in the northeast of Jefferson County is more valuable than in the southwest of the county, Hayes added.

?Farmland is valued on its ?corn suitability? on a scale of one to 100,? he said, ?That 65 acres had a corn suitability rating higher than 80.?

The quality of the soil and whether the land has trees or creeks also influences prices of farmland. The fewer obstacles, the higher the value.

He said buying and selling farmland in Jefferson County has been active the past two to three years.

?Sellers feel this is a good time to sell,? said Hayes. ?We?re having lots of estate sales and auctions.?

Auctions tend to bring higher prices than outright selling, he said.

All of Iowa?s 99 counties saw farmland values increase. Hayes is not worried about a ?bubble? or crash that the national housing market experienced.

?No, I don?t think there will be a bubble like the housing market,? he said. ?Fairfield never had that housing bubble anyway. I think the land values? market will correct itself. I don?t expect to see farmland to increase up to the 35 percent range.?

Hayes attributes the land value increases to crops? increasing values. Mike Duffy, economics professor and extension farm management economist at ISU who conducts the annual survey, agrees.

?Farmland values are highly correlated with gross farm income,? Duffy wrote in his report, co-authored with Wily Klein. ?As gross farm income increases so will land values. In 2005, corn prices averaged $1.94 per bushel in Iowa. The preliminary estimated price in November [this year] is $6.05. Soybean prices changed from $5.54 to $11.40 over the same period.?

Hayes said crop prices have risen because there are more markets.

?More things can be done with corn and soy, such as ethanol,? he said. ?We can get more products out of the crops now.?

Duffy also points out that interest rates are lower and more investors are turning to farmland because the stock market has not been as trustworthy.

ISU?s Extension and Outreach conducts the annual farmland value survey by contacting licensed real estate brokers, ag lenders and others knowledgeable of Iowa land values.

Hayes was one of the survey respondents ISU uses.