Iowa farmland values up 29%

A whopping 29%.

That's the increased value of all Iowa farmland since last year, Iowa State University reports in its annual land value survey, results of which were released Dec. 14 by ISU's Center for Agriculture and Rural Development.

That land values have increased is likely no surprise, but the magnitude of the jump is significant, says Wendong Zhang, associate professor of economics.

"The increase this year is in part due to much stronger commodity prices thanks to higher exports, stronger than expected crop yields, and strong ad hoc COVID-19 related government payments," Zhang says.

The increase is the largest since 2011, when land values rose 32.5%. Adjusted for inflation, however, this year's survey indicates prices are not as high as in 2012-13.

The average statewide value of an acre of farmland is $9,751, an increase of 29%, or $2,193, since 2020. The $9,751 per acre estimate, and 29% increase in value, represents a statewide average of low-, medium-, and high-quality farmland.

Several factors have influences on the increased land values, according to more than 450 survey respondents:

• Commodity prices up 20% to 40%
• Favorable interest rates
• Strong crop yields
• Limited land supply/strong demand and investor demand
• Government payments

All of these are influencing the farm economy, which is forecast to grow $22.0 billion (23.2%) from 2020 levels to $116.8 billion in 2021. That's the highest level since 2013.

"The increase in 2021 farm income is largely driven by the rises in commodity prices and the resulting crop and livestock receipts, as opposed to almost solely ad hoc federal government payments as in 2020," Zhang explains.

Looking back to 2011, the last time farmland jumped so dramatically, farmland prices jumped another 23.7% in 2012. Zhang said that while 80% of respondents had optimistic views about what the farmland market would look like one year from now, most reported that they expect values to increase less than 10% in 2022.

Looking five years ahead, Zhang said that the number of respondents expecting a decline in farmland values nearly doubled, but over 80% of respondents predicted that farmland values would rise another 10% to 20% over 2021 values.

Effect of Interest Rates

Zhang says members of the Federal Reserve have indicated some interest in raising interest rates to curb inflation. That could sidetrack the momentum in farmland values, particularly as changes in the interest rate will impact land values for 10 years.

"Monetary policy pushes up land values. If interest rates go up, that puts downward pressure on land values," he says.

Zhang notes 82% of Iowa land is owned debt-free and 60% is owned by people ages 65 and older. And, an increasing amount of land is owned by trusts and corporations, signaling a shift in family business entities.

Land Values by County

While all 99 Iowa counties showed an increase in land value, Scott and Decatur Counties reported the highest and lowest values, respectively for the ninth year in a row:

• Scott County increased 30%, or $3,193 per acre, to $13,852.
• Decatur County increased 31.5%, or $1,213 per acre, to $5,062.

Meanwhile, Clayton and Allamakee Counties reported the largest percentage increase, 36.4%, while Scott County saw the largest dollar increase, $3,193 per acre. The smallest percentage increase, 23.2%, was reported in Keokuk County, while Taylor County saw the smallest dollar increase, $1,199 per acre.

Land Values by District

Land values across all crop reporting districts increased. The Northwest district reported the highest overall value, $12,164 per acre, while the North Central district reported the largest percentage increase, 34.5%, and the largest dollar increase, $2,737 per acre.

The South Central district reported the lowest values, $6,035 per acre, and the lowest dollar change, $1,377 per acre, while the Southeast district saw the smallest percentage increase, 21.9%.

Land Values by Quality

Across Iowa, low-quality averages $6,397 per acre, an increase of 26% or $1,319 per acre. Medium-quality land now averages $9,071 per acre, an increase of 27.4% or $1,953 per acre. High-quality land now averages $11,834 per acre, an increase of 30.5% or $2,766 per acre.

The Northwest district reported the highest values for low-, medium-, and high-quality land at $8,088, $11,042, and $13,997 per acre, respectively. The South Central district reported the lowest values for low-, medium-, and high-quality land at $4,058, $6,094, and $8,194 per acre, respectively.

Low-quality land in all crop reporting districts, less the Southeast district, saw increases of more than 23%. The North Central district saw the largest percentage increase, 32%, and the largest dollar increase, $1,695 per acre. The Southeast district showed the smallest percentage increase, 14.5%, and the smallest dollar increase, $600 per acre.

Medium-quality land saw increases of more than 30% in the North Central, Northeast, West Central, and South Central districts. The South Central district saw the largest percentage increase, 33.6%, while the North Central district showed the largest dollar increase, $2,291 per acre. The Southwest district reported both the smallest percentage increase, 22.3%, and the smallest dollar increase, $1,302 per acre, in medium-quality land.

High-quality land in the North Central, Northeast, West Central, and East Central districts all saw increases of more than 30%, with the North Central district reporting the highest percentage increase, 35.7%. The East Central district reported the largest dollar increase in high-quality land at $3,304 per acre. The Southeast district reported the smallest percent change in high-quality land, 25%, and the South Central district reported the smallest dollar increase, $1,786 per acre.

The Iowa State Land Value Survey was initiated in 1941, the first in the nation, and is sponsored annually by Iowa State. The survey is typically conducted every November and the results are released mid-December. Only the state average and the district averages are based directly on the Iowa State survey data. County estimates are derived using a procedure that combines the Iowa State survey results with data from the U.S. Census of Agriculture. "Like many of the surveys you see, this is an opinion survey. Experts are knowledgeable about the local land market. They are providing general information about trends over time, not an appraisal of the land," Zhang says.