Iowa farmland values fall 5 percent

The value of an average acre of good Iowa farmland fell 5 percent over the last six months and almost 9 percent over the last year, according to a new farm real estate survey.

The Iowa Chapter of the Realtors Land Institute (RLI) on Wednesday reported an average acre of farmland was worth $6,732 on March 1, down from $7,372 on March 1, 2015. Survey participants, who are specialists in farmland sales and development, were asked to estimate the average sale price of an acre of bare, unimproved land on a cash basis.

Combined with a 3.7 percent decline from March 1, 2015, through Sept. 1, 2015, the value of an average acre of Iowa farmland has fallen 8.3 percent.

A survey of agricultural bankers in the Chicago Federal Reserve District, which includes Iowa, found farmland values fell 5 percent from Jan. 1, 2015, to Jan. 1, 2016.

Troy Louwagie of Hertz Real Estate Services in Mount Vernon was not surprised by the survey results.

'We had some sales last fall of $11,000 and $11,400 an acre,” Louwagie said. 'We had some great crop yields and buyers were optimistic.

'Very few farms have sold since the first of the year. The market has really quieted down.”

All nine Iowa crop reporting districts reported a decrease in value. The districts varied from a 2.4 percent decline in the east central district to a 6.2 percent drop in the northwest and south central districts since September 2015.

Survey participants attributed the decrease in farmland values to lower commodity prices, limited amount of land on market, and high input (seed and fertilizer) costs. Other factors include lack of stable alternative investments (stocks, bonds and bank certificates of deposit), cash on hand, and increasing interest rates.

Louwagie said farmland buyers are more cautious than they were as recently as March 2013 when the sale price of an average acre of Iowa farmland soared to $8,690.

'If it is a good farm adjoining them, they will still buy and pay a strong price,” he said. 'If it's a farm they don't need, they will sit back and pass on it for the time being.”

Louwagie said commodity prices are driven by a combination of supply and demand and the weather.

'We're one drought away from strong commodity prices again,” he said. 'Land prices swung too far in one direction and it's coming back.

'We're having a little correction and that's good in terms of long-term volatility.”