Des Moines Register
03/17/06
Farmland prices rise at slower rate
Lower crop prices, higher energy costs cited in slowdown
JERRY PERKINS
REGISTER FARM EDITOR
Ames. Ia. — Iowa's once-hot farmland market appears to be cooling, according
to a survey released Thursday of farmland sales agents and appraisers.
Prices for all types of Iowa farmland rose 2.4 percent from September to March
1, said Troy Louwagie, president of the Iowa Farm and Land Chapter No. 2
Realtors Land Institute. The group sponsors the farmland price survey every six
months.
The best farmland - that which produces 160 bushels of corn an acre or better rose 2 percent in the state during the past six months.
The exception to the cooling farmland market was in recreational property near
Des Moines, where double-digit increases continued to be reported for forested
land.
"We've been on a steep ride up, and now we're seeing it level off," said
Louwagie, who works for Hertz Real Estate Services in Mount Vernon.
Farmland prices in Iowa rose 5.5 percent from March 1, 2005, to Sept. 1, 2005,
Louwagie said.
Overall, the annual increase in Iowa farmland prices was 7.2 percent.
Iowa farmland prices rose 14.4 percent in 2004 and 12 percent in 2005,
according to the survey.
Louwagie said survey respondents cited a number of factors for the slowing of
Iowa's recent rapid run-up in farmland prices:
• Uncertainty over future government farm program payments.
• Lower prices for corn and soybeans.
• Higher loan interest rates.
• Higher energy costs that add to the rising cost of producing crops.
Cited by survey respondents for the increase in farmland prices were:
• A shortage of farms for sale.
• Strong demand from farmers seeking to expand their operations.
• Tax-deferred land exchanges.
• Investors seeking to diversify their assets.
• Good yields in most of the state in 2005.
Dale Caraway of Caraway Realty in Maquoketa said he saw potential buyers of
farmland walk away from deals because they believed the price of farmland was
too high.
Louwagie said demand for Iowa farmland has slowed because potential buyers
don't know what to expect from the next farm bill, which is scheduled to take
effect next year.
"Buyers are a little more reserved," he said. "The market needs to level off until
we find out what the next farm bill will look like."
Another reason why there is less demand for farmland might be the popularity of
alternative investments, such as ethanol and biodiesel plants and wind turbines,
Louwagie said.
Investments in renewable energy projects show much promise because of rising
petroleum prices and an emphasis on more domestic energy production. There
are environmental benefits from ethanol made from corn, biodiesel made from
soybeans and wind energy. Because of its potential use for recreation and
hunting, timberland increased in price more than the best cropland in the state,
Louwagie said.
The average price of an acre of timberland in Iowa rose 6 percent from
September to March 1, he said. In south-central Iowa, timberland rose 17 percent
in price in the past six months, the survey showed.
In contrast, the best farmland rose 3 percent in south-central Iowa in the past six
months, and 2 percent in the state during the past six months. "This shows that
the recreation market is very strong," Louwagie said.
Timberland prices in south central Iowa are rising rapidly, he said, because of
demand from people in the Des Moines area who want to hunt or build a country
home in the area.
The Iowa State University land price survey released in December also
showed that farmland price increases have slowed.
A survey of agricultural bankers by the Federal Reserve Bank of Chicago
showed a 10 percent increase in Iowa farmland prices in 2005, down from a 12
percent rise the previous year.
Louwagie said the land institute sent 300 surveys, asking for assessments of
land prices. There were 180 surveys returned.