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Iowa farmland at historic high, but still lower than 2012 and 2013 when adjusted for inflation

By Bob Steenson, [email protected]

The average value of farmland skyrocketed in Floyd and surrounding counties in 2021, according to an annual survey by Iowa State University and Iowa State University Extension and Outreach.

Every county increased the average value per acre of farmland from 2020 to 2021 at a rate higher than the state average, ranging from a 29.2% increase in Floyd and Mitchell counties, all the way up to a 35.4 percent increase in value in Franklin County.

Although Franklin had the greatest gain, the highest average value per acre occurred in Bremer County, where the survey showed it at $11,251 per acre. The lowest value among the nine area counties was $9,168 per acre in Howard County.

Iowa farmland at historic high, but still lower than 2012 and 2013 when adjusted for inflation
2021 Average Farmland Values by County. Press graphic by Bob Steenson

The average price per acre in Floyd County was $9,916, up from $7,673 in the previous year’s survey.

Across the state, the average value of an acre of farmland increased 29 percent this year, the report said.

The average dollar value of an acre of farmland is now higher than at any point since ISU and the ISU Extension and Outreach started surveying land values in 1941, and is 12% higher than the previous high mark set in 2013.

Adjusted for inflation, however, the land values in 2012 and 2013 were higher than the current averages.

The last time average farmland values increased more than 25% in a single year was in 2011, when values rose 32.5%.

“Surging ethanol demand and high commodity prices were two of the significant factors driving the increase in 2011,” said Wendong Zhang, an associate professor in economics and extension economist at Iowa State’s Center for Agricultural and Rural Development.

“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,” he said.

Zhang leads Iowa State’s annual Land Value Survey, which found that 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.

Zhang said that favorable interest rates also contributed to the increases in 2011 and this year; however, he noted that inflation was a very important factor behind the value increase this year as well. Earlier this month, the U.S. Bureau of Labor Statistics reported that the nation’s inflation rate rose 6.8% over the last year, which was the largest increase since 1982.

“Inflation is driving some investors to consider farmland as an alternative investment asset because farmland value tends to rise with higher inflation. The inflation-adjusted average value rose 21% but the nominal value rose 29%, which shows the effect of inflation,” Zhang said.

As for U.S. net farm income, Zhang said it is forecasted to grow $22.0 billion (23.2%) from 2020 levels to $116.8 billion in 2021, which is 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,” he said.

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.

All 99 of Iowa’s counties showed an increase in land values. For the ninth consecutive year, Scott and Decatur counties reported the highest and lowest values, respectively. Land values in Scott County increased 30%, or $3,193 per acre, to $13,852. Land values in Decatur County increased 31.5%, or $1,213 per acre, to $5,062.

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.

Statewide, low-quality land now 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.

The most frequently mentioned positive factor influencing the land market was higher commodity prices. Favorable interest rates and strong yields were the second- and third-most frequently mentioned factors. Other frequently mentioned factors included limited land supply, strong demand, COVID-related government payments and a good farm economy.

The most frequently mentioned negative factor affecting land values was higher input costs. Other noted factors included concerns about the sustainability of high land prices, possible changes in interest rates, political uncertainty related to policies, such as tax law changes, and uncertainty related to COVID-19.

Land values were determined by the 2021 Iowa State University Land Value Survey, conducted in November by the Center for Agricultural and Rural Development at Iowa State and ISU Extension and Outreach. Results from the survey are consistent with results by the Federal Reserve Bank of Chicago, the Realtors Land Institute and the U.S. Department of Agriculture.

The Iowa State Land Value Survey is based on reports by agricultural professionals knowledgeable of land market conditions, such as appraisers, farm managers, agricultural lenders and actual land sales, and is intended to provide information on general land value trends, geographical land price relationships and factors influencing the Iowa land market.

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