Wallace's Farmer, IA
03-27-07
Iowa Farmland Prices Jump 13.6%
Rod Swoboda rswoboda@farmprogress.com
Iowa farmland prices rose 13.6% in the past six months, according to a survey
released last week by a statewide organization of farm real estate brokers and
appraisers. The Iowa Farm and Land Chapter No. 2 Realtors Land Institute
conducts the survey every six months.
Respondents to this latest survey, which was released March 20, say that land
price increases are being fueled by increased grain prices which are tied to the
escalating demand for corn and soybeans by ethanol and biodiesel plants.
"The high quality one-third of the land is averaging over $4,000 per acre
according to this survey," says Troy Louwagie, spokesman for the farm realtors
group. "The statewide average is $4,313 per acre. In fact, in seven of the nine
districts in Iowa, the average price is above $4,000 per acre for the high-quality
land. That's the average, which means some farms have sold for more. In all of
the districts in Iowa during the last six months, there has been some farmland
sell for $5,000 or more per acre."
Some land has sold for $5,000
"The farmland price increase during this most recent six-month period, which is
from September to March, is one of the biggest increases ever," says Louwagie,
who works for Hertz Real Estate Services in Mt. Vernon. "When combined with
the 2.9% increase in the previous six months, the statewide average increase
was 16.5% for the year, from March 2006 to March 2007."
The six-month rate of increase for the best farmland was 14%, reflecting the
rapid increases in commodity prices during and after the 2006 harvest. Louwagie
says farmers seeking to expand their operations have been most aggressive in
bidding up the price of farmland. "Nonfarm investors tend to sit on the sidelines
when land gets this high, but farmers stay interested in bidding," he says.
The annual rate of increase for the state's best farmland - that which produces
more than 160 bushels of corn per acre - was 16.8% from March 2006 to March
2007. Louwagie says that 16.8% annual rate of increase for the best and is the
second highest in 20 years. In March 1988, he says, the best Iowa farmland rose
20% in one year. In September 1996, it rose 16% for the year.
Very little land being offered for sale
Realtors participating in the survey noted that not much land is being put up for
sale. Rod Larson, a farmland broker for Farmers National Company in Webster
City, says most of the farmland sales he is seeing are being made by heirs and
estates. Land is an important part of the investment portfolios of many Iowans,
including the heirs of farmers and other landowners.
Half of Iowa's farmland is expected to change ownership in the next 10 to 15
years, according to an Iowa State University study, as Iowa farmers grow older
and their heirs decide to sell the land. "This latest run-up in farmland prices might
present those heirs with a good opportunity to sell," says Larson.
He notes that today's farmland market is different because it is being driven by
demand for corn and soybeans, not by speculation.
Some uncertainty, but optimism reigns
Despite the widespread optimism that is being sparked by the renewable fuels
boom in Iowa, Louwagie says there were some negative market factors
mentioned by the land survey respondents.
Uncertainty over the next farm bill being discussed in Congress and rising costs
of fuel and fertilizer were mentioned by most survey participants. Land prices
follow commodity prices, and a decline in land prices could occur if corn and
soybean prices drop, if interest rates rise or if government farm programs are
less generous than they have been.
But overall, the survey shows a continued strong outlook for land prices based on
the biofuels boom. Several realtors say they haven't seen this much optimism in
agriculture in 25 years. "Ethanol has really fueled the increase in land values,"
says Sam Kain, a broker with Farmers National in West Des Moines. "If you
aren't selling your land at public auction, you're leaving money on the table."