Farmland Value 0918

This fall’s survey results indicate farmland values in Iowa have slipped over the past six months, though the market depends greatly on location and availability.

AMES, Iowa — Volatility is the key word in the farmland market this year. Values fell 1.7 percent in Iowa over the past six months, but that follows a 2.9 percent increase during the previous six months, so values are still up 1.2 percent for the past year. The average farmland value in Iowa is now $6,844.

“Last year was mixed,” says Kyle Hansen, a realtor with Hertz Real Estate Services in Nevada, Iowa.

Hansen conducts the Realtors Land Institute Iowa Chapter land values survey every six months.

This fall’s survey results indicate farmland values in Iowa have slipped over the past six months, but Hansen says it is difficult to tell where those values will go from here.

“The future is uncertain,” he says.

History, politics and the economy provide a few clues. Land values collapsed in the 1980s, bottoming out in 1987. They rose since then, climbing dramatically after 2000 and peaking about four years ago. That was followed by about three years of mild decline. Now, Hansen says, the market is trying to figure out if it has bottomed out or if it will drop further.

It hasn’t helped that commodity prices have fallen over that four-year span and that the commodity price outlook isn’t especially rosy. And the trade war initiated by President Donald Trump has further dampened both prices and the mood of farmers. That trade war is one of the major factors behind the drop in the past few months, Realtors say.

“That’s the biggest thing,” says Roger Johnson with Farmers National Company out of Cedar Falls.

“They’re afraid of a stroke of a politician’s pen,” adds Sam Kain of Farmers National Company in West Des Moines.

Still, the market right now depends greatly on location and availability. In some areas prices are falling, while in others there may be good demand for a specific farm. The surveyed Realtors say it looks likely there will be more sales in the coming months than there have been recently, perhaps in part because some owners have decided the market has peaked.

That doesn’t mean farmers are being forced to sell by bankers, Hansen says. That may happen in some circumstances, but most sales are still being made by estates and off-farm heirs, some of whom may be deciding that now is a good time to get out of the farmland market.

He adds that recent tax legislation passed on both the state and federal levels has had little impact on land prices or sales, other than the fact that the federal bill did not eliminate the 1031 exchange part of tax law, which allows property owners to sell one piece of property and buy another without suffering a tax hit.

“That was a very important key to the tax reform,” Hansen says.

The Realtors survey shows results by crop reporting district. For the past six months it shows prices in North Central Iowa staying exactly the same and prices in Northeast Iowa actually climbing slightly, by 0.7 percent. Prices fell in the other seven crop reporting districts in the state. The highest drop came in West Central Iowa, where prices fell 3.9 percent. Central Iowa was right behind with a dip of 3.5 percent. The other districts all reported smaller declines:

  • East Central Iowa fell 2.3 percent,
  • Northwest Iowa fell 0.6 percent,
  • South Central Iowa fell only 0.2 percent,
  • Southeast Iowa dropped 2.6 percent and
  • Southwest Iowa fell 2.4 percent.

Prices for pasture land also fell everywhere except in North Central Iowa, where there is relatively little pasture available. Demand for timber land remained relatively strong.

Gene Lucht is public affairs editor for Iowa Farmer Today, Missouri Farmer Today and Illinois Farmer Today.