Iowa farmland value increases beginning to moderate

A survey of farmland values from Federal Reserve Bank of Chicago shows the dollar value of "good" Iowa farmland rose 20 percent in the year preceding April 1, but the rate of increase began to moderate in the most recent quarter.

The dollar value of Iowa farmland rose 3 percent from Jan. 1 through April 1, 2013, easing down from the 8 percent jump on the final quarter of 2012.

But the year-over-year increase matched the 20 percent recorded from Jan. 1, 2012, through Jan. 1, 2013.

Across the entire five-state Seventh Federal Reserve District, the dollar value of farmland rose 4 percent in the first quarter of this year and 15 percent year over year, also matching the increase recorded from Jan. 1, 2012, to Jan. 1, 2013. Along with Iowa, the district includes Illinois, Indiana, Michigan and Wisconsin.

Michigan recorded the largest quarterly increase of 12 percent and the largest year-over-year jump of 24 percent.

David Opedahl, Chicago Fed business economist, said demand to purchase agricultural land increased in the final quarter of 2012 and the first quarter compared with the same period a year ago.

"Similarly, the number of farms sold, the amount of acreage sold, and the amount of farmland for sale rose during the winter and early spring of 2013 compared with a year ago," Opedahl said. "Farmland cash rental rates in the district were 11 percent higher in 2013 compared with 2012."

Opedahl said the rising cash rental rates and farmland values reflected higher crop prices. Prices in the first quarter of this year averaged $7.06 per bushel for corn and $14.47 per bushel for soybeans, according to the U.S. Department of Agriculture.

The survey of banks in the five-state region found agricultural credit conditions improved in the first quarter of 2013 compared with the same period of 2012.  Sixty-one percent of the survey respondents reported  their banks had more funds available to lend and under 1 percent reporting their banks had less.

Opedahl said the cool, wet weather that has delayed the planting of corn and soybeans has virtually eliminated the drought condition that sharply reduced yields in the fall harvest. He noted that the USDA recently an easing of tight crop stocks because of the anticipated record harvests of corn and soybeans in the fall.

"Lower crop prices could slow the upward trend in farmland values," Opedahl said. "Many district bankers responding to the survey appeared to share this view.

"For the second quarter of 2013, 19 percent predicted farmland values to increase, while 4 percent expected them to decrease. The vast majority anticipated farmland values to be stable."