Iowa farmland values jumped 29% in 2021, boosted by commodity prices, favorable interest rates and government ad-hoc payments. (Photo: Joclyn Bushman/Iowa Soybean Association)
Iowa farmland values skyrocket 29% in 2021
December 16, 2021 | Bethany Baratta
Strong crop yields, higher crop and livestock prices, favorable interest rates, robust federal ad hoc payments, and limited land supply supported a lift in Iowa land values by 29% over 2020 values. Results from Iowa State University’s Land Value Survey, issued this week by ISU’s Center for Agricultural and Rural Development, shows the average value of an acre of Iowa farmland rose 29% over the past year to $9,751/acre as of Nov. 1, 2021. All nine crop reporting districts in the state showed an increase in farmland values.
The nominal value of an acre of farmland is now higher than at any point since Iowa State University began surveying values in 1941, says Wendong Zhang, Iowa State University assistant professor of economics and ISU Extension economist. Values are 12% higher than the previous peak in 2013; although the current value in inflation-adjusted terms are still lower than that for 2012 and 2013.
“This year has been remarkable in the sense that after land values have been stagnant for a few years we see a dramatic increase over the past 12 months,” Zhang says.
The 2021 survey results are based on 645 county-level value estimates provided by 455 agricultural professionals, mostly ag lenders and broker/realtors. Started in 1941, the survey is the only one which provides estimates for all of Iowa’s 99 counties. The survey has been conducted by the Center for Agricultural and Rural Development in the Department of Economics at Iowa State University and Iowa State University Extension and Outreach since 2014.
Respondents cautious, yet optimistic
Despite the positive factors leading to the increase in Iowa land values, Zhang says respondents had some reservations.
“Respondents are increasingly concerned about higher input costs, the sustainability of high land prices, possible changes in interest rates, and political uncertainty regarding policies, such as possible tax law changes, which were all cited as negative factors influencing the land market,” Zhang says.
In general, survey respondents are very optimistic about the strength of the future land market with 80% of respondents forecasting a continued increase in Iowa land values.
The groups used the following formula to determine the increase/decline in value of each county: land value=localized net income ÷ universal interest rate.
The largest percentage increases were in the North Central and West Central districts, 34.5% and 33.1%, respectively.
The Southwest and Southeast districts, which saw the smallest percentage changes, also reported an increase of more than 20%.
High quality land across all districts saw higher land value increases compared to medium- and low-quality land, Zhang says, noting competitive bidding in high quality land due to low availability.
The highest value was estimated for Scott County, at $13,852 per acre, driven in part by its location in relation to the Quad Cities and its proximity to Mississippi River and associated markets, Zhang said.
The lowest value was in Decatur County, at $5,062 per acre.
How it compares
Zhang says results from the 2021 Iowa State University Land Value Survey confirm results from other surveys, which all showed surging farmland market trends due to higher commodity prices and low interest rates.
In November 2021, the Federal Reserve Bank of Chicago reported a 28% increase in Iowa‘s “good” farmland values from October 2020 to October 2021. In September, the REALTORS® Land Institute reported an overall 26.6% increase in Iowa cropland values from September 2020 to September 2021. The U.S. Department of Agriculture June Area Survey reported a 9.6% rise in Iowa‘s agricultural real estate values (land and building) from June 2020 to June 2021. Zhang says this is smaller in magnitude because it did not capture the continued surge from June 2021 to November 2021.
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