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State and Floyd County area average farmland values mostly increase

State and Floyd County area average farmland values mostly increase
By Bob Steenson, bsteenson@charlescitypress.com

There were more good things than bad things affecting the price of land in Iowa in 2020, according to the latest Iowa State University annual study.

The Iowa Land Value Survey shows the statewide average value of an acre of farmland is $7,559, an increase of $127 an acre or 1.7% over the previous year.

State and Floyd County area average farmland values mostly increaseIn Floyd County, the average price of an acre of land increased 0.3 percent, from $7,654 an acre in 2019 to $7,673 this year.

Surrounding counties showed changes ranging from an increase of 5.6% per acre, to $6,965 in Howard County, down to a loss in average value in Cerro Gordo County of -0.5%, to $7,762 an acre.

Favorable interest rates, a strong demand for land and substantial government payments helped stabilize Iowa’s farmland market in a year in which Iowa’s farmers also faced the destruction of a derecho, uncertainties in U.S. agricultural trade, and a pandemic that significantly altered market demand, according to the report, which was released Tuesday.

“The land market faced downward pressure initially with the onset of the COVID-19 pandemic, which lowered food demand and resulted in declines in livestock and ethanol prices,” said Wendong Zhang, an assistant professor of economics at Iowa State University who leads the annual Iowa Land Value Survey.

Statewide, Iowa’s high-quality farmland saw a decline in value of 0.1%. However, Zhang said, that number is more indicative of a flat market, rather than a decline, and several factors have led to a recent rebound in the market.

“The rebound in recent months is due to strong government payments, interest rate cuts, limited land supply, and recent commodity price rallies,” he said.

In mid-November, corn and soybeans prices hit their highest point so far this year. Despite some decline since then, both prices are still higher than at the beginning of the year, especially soybeans.

“The export surges related to the phase one deal and China’s efforts to rebuild its hog herd ramped up demand for feed grains,” Zhang said.

There are concerns about the price rally, he said, because post-harvest prices are typically lower. However, he stressed that China is still at least 10% to 15% short of its regular hog inventory, so farmers should continue seeing increased feed grain demand.

Germany, a key competitor for U.S. pork exports, is now battling with African swine fever, the same disease that decimated China’s hog industry, which could increase U.S. pork exports in the future.

Zhang also said that farm payments in 2020 helped prop up the farmland market “in a big way.”

According to the USDA’s Economic Research Service, farm payments will increase 107% in 2020, mostly due to supplemental and ad hoc disaster assistance for COVID-19 relief. USDA also projects net farm income will increase 43.1% in 2020.

Some of the increase in overall land value this year is due to increased demand for low-quality land in certain parts of the state. Low-quality land in the northeast, west central, south central and southeast districts saw increases of 8% or more.

“Strong demand for pasture and timber grounds, which are even more appealing now with social-distancing requirements, contributed to the rise in low-quality land value,” Zhang said.

Seventy-eight of Iowa’s 99 counties showed an increase in land values. For the eighth year in a row, Scott and Decatur counties reported the highest and lowest values, respectively. Despite having the highest overall value, average land values in Scott County decreased $178 per acre to $10,659. Decatur County, however, saw average values increase $264 per acre to $3,849.

Wayne County reported the largest percentage increase, 7.7%, while Lyon County saw the largest dollar increase, $577 per acre. The largest dollar decrease was reported in Des Moines County, $241 per acre, and the highest percentage decrease, 3.4%, was reported in Henry County.

The northwest crop reporting district reported the highest land values, $9,536 per acre, and the south central district reported the lowest, $4,658 per acre.

Favorable interest rates, limited land supply, and recent commodity price rallies were the most frequently mentioned positive factors influencing the land market in this year’s survey. Other positive factors respondents noted included COVID-related payments, government payments, and strong demand for land, especially by farmers.

The most frequently mentioned negative factors affecting were lower commodity prices, uncertainty due to the COVID-19 pandemic and weather. Other negative factors included political uncertainty related to the 2020 election, poor yields, and general economic uncertainty.

The Iowa State Land Value Survey was started in 1941 and is sponsored annually by Iowa State University. It is based on reports by agricultural professionals knowledgeable of land market conditions, such as appraisers, farm managers and agricultural lenders, and is also based on actual land sales.

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