Farmland values fall on commodity prices

The average value of a good acre of Iowa farmland declined 7.6 percent to $9,924 over the past six months, according to a survey released Tuesday by the Iowa Chapter of Realtors Land Institute.

Combining the 7.6 percent decrease with the 3.4 percent decline reported in September indicates a statewide average decline of 11 percent from March 1, 2014, to March 1 of this year.

All nine crop reporting districts posted decreases over the past six months, according to the survey. The districts varied from a 4.6 percent decline in southwest Iowa to an 11 percent drop in northeast Iowa.

Troy Louwagie of Hertz Farm Management in Mount Vernon said the survey results were not surprising.

'It's completely tied to commodity prices,” Louwagie said. 'When you look at commodity prices today compared with what they were two years ago, the profit margins have definitely narrowed.

'We have not seen cash rents drop very much at all. The margins are going to continue to be tight in the 2015 crop year.”

Corn has dropped from $7.49 a bushel on March 31, 2013, to $4 a bushel or less on the same day this year. Soybeans have declined from $14.60 on March 31, 2013, to about $9.60 a bushel on Tuesday.

RLI said other factors negatively affecting land prices were higher input costs, interest rates moving higher and government regulation uncertainty involving the U.S. Environmental Protection Agency.

Positive factors for farmland values include relatively low interest rates, limited amount of land offered for sale, strong livestock market, renewed interest from investors, cash on hand and fear of inflation.

The RLI results mirror recent farmland values surveys by Iowa State University and the Federal Reserve Bank of Chicago. The value of an average acre of good Iowa farmland fell 8.9 percent from Nov. 1, 2013, through Nov. 1, 2014, according to ISU, while the Federal Reserve Bank reported a 7 percent decline between Jan. 1, 2014, and Jan. 1, 2015.