Des Moines Register
09-18-07
Farmland prices grow, but rate abates
The clamor for more corn and soybeans to make biofuels is driving up the value
of Iowa's most precious resource.
By JERRY PERKINS
REGISTER FARM EDITOR
Rapidly rising farmland prices have slowed in the last six months as more land
comes on the market, a survey released Monday shows.
Iowa farmland prices rose 7.1 percent in the six-month period ended Sept. 1,
according to the Iowa Farm and Land Chapter No. 2 Realtors Land Institute.
Since last fall, prices of Iowa farmland have increased at a record rate of 20.7
percent, said Troy Louwagie of Hertz Real Estate Services in Mount Vernon,
chairman of the land institute's survey committee. The previous record annual
increase was 20.2 percent, which was recorded in 1988, Louwagie said.
Farmland is an important component of the investment portfolios of many
Iowans, including the heirs of farmers and other landowners. High land prices are
a boon for retiring farmers who want to cash out, but they are cited as a barrier
for young people and others trying to buy land to start farming.
The survey of farmland real estate brokers showed:
- The 7.1 percent increase in the six months from March 1 through Aug. 31 is
about half the 13.6 percent increase reported for the six-month period ended
March 1.
"There still is strength in the market, but it seems to be slowing down a little until
we get into harvest and find out what yields are," Louwagie said.
- Prices of the state's most productive farmland - land that produces more than
160 bushels of corn per acre - rose at an even higher rate: 8 percent for the last
six months and 22.6 percent for the year.
- For the first time since the survey began in September 1978, the price of
farmland topped $5,000 per acre in one of the nine Iowa crop reporting districts.
That occurred in central Iowa, Louwagie said, where the best farmland averaged
$5,064 per acre.
Among the factors affecting the rise in farmland prices mentioned by survey
respondents, Louwagie said: higher corn and soybean prices, increased demand
from ethanol and biodiesel plants, a limited amount of land for sale, good crop
yields, a positive attitude about future farm profits, low interest rates and tax law
exchanges.
Negative impacts on farmland prices mentioned by survey respondents were
uncertainties over government programs and increased costs of fuel and
fertilizer, Louwagie said.
Sam Kain of Farmers National Co. in Des Moines said uncertainty over the
upcoming farm bill, which is now being debated by the U.S. Senate Agriculture
Committee, has spawned uncertainty about future policies.
"There is still a lot of discussion on some areas that could have an impact," Kain
said. "There's talk of capping payment limits at $200,000, and that could affect
the larger producers."
The farmland market is still showing strength, but the big increases of the past
are slowing, Louwagie said.
More land is for sale than usual, he said, an indication that some people have
decided it might be time to sell farmland at these relatively high prices.
"There's more land on the market in the last 60 days than we've seen for a
while," Louwagie said.
Most farms being offered for sale are coming from estates, he said, but a few
retired farmers also are offering to sell their farms if they can get $5,000 per acre.
Lyle Hansen of Southwest Iowa Real Estate Co. in Audubon said some people
who had inherited the family farm had been holding onto the land for sentimental
reasons.
"At $5,000 an acre, you just sold the sentiment," Hansen said.
The land institute's survey appeared to be consistent with a survey of land prices
released last month by the Federal Reserve Bank of Chicago. The bank's survey
of agricultural lenders showed that Iowa farmland prices rose 18 percent for the
year ended July 1.
Last year, Iowa State University reported that Iowa farmland rose 10 percent in
2006 to an all-time high of $3,204 per acre. The 2007 Iowa State farmland value
survey will be released in December.
Farm Editor Jerry Perkins can be reached at (515) 284-8456 or
jperkins@dmreg.com