Iowa average farmland price edges up 1.4% in last 6 months

The days of steep increases in Iowa average farmland prices appear to be over, according to a new survey from the Iowa Chapter of Realtors Land Institute.

The average value of Iowa farmland rose 1.4 percent from March 1, 2013, to Sept. 1, 2013. Combined with a 9.4 percent increase reported on March 1, the average price of Iowa cropland rose 10.6 percent from March 1, 2012, to March 1, 2013.

That's a sharp contrast to previous increases reported by RLI. The average price of Iowa farmland jumped 17.1 percent from March 1, 2012, to March 1, 2013.

The nine Iowa crop reporting districts showed mixed results, varying from a 5 percent increase in the east central district to a 0.7 percent decline in northeast Iowa since March 1.

Troy Louwagie of Hertz Farm Management in Mount Vernon said a number of factors contributed to the moderation of Iowa farmland prices.

"We had a very strong market until the May-June time period when commodity prices slipped back to the levels we see today," Louwagie said. "Since that time, the demand for land has slowed down or softened.

"A majority of that has to do with the lower commodity prices. We've had some dry weather over the last six weeks and there's a lot of unknowns about what our yields are going to be and what prices are going to do after the harvest."

Louwagie said the primary buyers of farmland are active farmers.

"They've had some nice profits over the last few years and anytime there's profits in farming, they put it back into additional farmland," Louwagie said.

Louwagie also pointed to other factors affecting farmland prices including an increase in long-term interest rates, lack of stable alternative investments and a limited amount of farmland on the market.

Cash rent for Iowa cropland jumped again this year to an average $255 per acre. Louwagie expects cash rents also will moderate in the near future.

"I think lease rates are going to level or flatten," Louwagie said. "There are a lot of people who are going to wait until this crop is out of the field and see what commodity prices are going to do.

"If commodity prices stay the way they are now, I think cash rents will moderate for a few years."

Participants in the RLI survey were asked to estimate the average value of  bare, unimproved land with a sale price on a cash basis. The farmland value survey has been conducted in March and September since 1978.