Farmland values moderate in Iowa

Prices and demand for farmland continue to moderate in Iowa, Nebraska, South Dakota and Wyoming, according to a new study by Farm Credit Services of America.

The average value of farmland in Iowa and Nebraska declined during the first six months of 2015. In South Dakota and Wyoming, prices increased but at a slower rate compared with the last half of 2014.

FCSAmerica of Omaha and Frontier Farm Credit of Manhattan, Kan., track 71 benchmark farms with appraisers. Twenty-one Iowa farms were tracked between January and July, showing a 4.65 percent decline in farmland values. From July 2014 to July 2015, farmland values in Iowa fell 10.45 percent. But the same benchmark farms registered a 71.53 percent increase in farmland values over the last five years and a 168.6 percent jump over the last decade.

The overall decline in cropland values reflected lower grain prices compared to previous years, according to FCSAmerica. Profitability on higher priced land remains top of mind for many producers, and the lower grain prices and decreased margins will continue to put pressure on land prices, as well as cash rents.

A 2015 survey from Iowa State University reported a one-year decline of more than 5 percent in average cash rents for Iowa cropland. Iowa's average cash rent has dropped nearly 9 percent compared with 2013's high of $270 an acre.

While the market decline has prompted concern that farmers are facing another crisis similar that of the early 1980s, Mark Jensen, chief risk officer at FCSAmerica contends the two periods are distinctly different.

In the 1980s, high land prices accompanied by high borrowing levels resulted in over-leveraged operations with few financial remedies. Today, farmers face a cash-flow challenge primarily tied to higher cash rents and equipment and machinery costs and increasing family living expenses.