USDA reports Iowa cropland value up 23.9% in 2011

The value of Iowa cropland skyrocketed by a nation-leading 23.9 percent in 2011, according to a USDA report released this week.

Growth in Iowa cropland value was the fastest of any state, outstripping the 16 percent increase in the five-state Corn Belt region and the national increase that averaged 9.4 percent.

The average value of cropland in Iowa was placed at $5,700 per acre in the state in the USDA Land Values 2011 report, lagging only a few other states.

While the USDA report is just one of several on farmland values, it does not conflict with other recent findings, according to Iowa State University Economist Mike Duffy, who oversees ISU's annual farmland value survey due out in December.

"This doesn't surprise me at all," Duffy said, pointing to low interest rates and high commodity prices for corn and soybeans that have resulted in better farming returns. He said Iowa's high concentration of land used to crop corn and soybeans is one reason its farm land values grew faster last year than values in other states. Farmland values in Illinois and other more urbanized states probably saw some erosion of farmland values due to lowered development demand in the housing downturn, Duffy added.

The whopping increase is sure to fuel more debate over whether farm land values have become overheated and are in line for a correction.

Duffy said he does not expect such large increases to be sustained, but doesn't expect a price collapse. He said a 2009 dip in Iowa farmland values shows there is still some discipline in the farm land investing market, and "we still have very good fundamentals."

"We have very low interest rates, but we also don't have much borrowing on farmland," Duffy said.

The 2011 increase was based on January 1 values, Duffy said, and reflects a significant increase from the ISU study's based on Nov. 1 values. It was not the highest increase reported by the USDA, noting a higher increase in 2004.

Farm real estate specialist Troy Louwagie of Hertz Farm Real Estate Services in Mount Vernon said he believes the most prime crop land probably gained 35 percent in value over the past year, offsetting more modest increases of 15 percent or so for below average crop land.

Farm real estate overall in Iowa had an average value of $5,600, the report said. The figure includes both land and buildings.

Pasture land in Iowa had an average value of $2,650, compared to a nationwide average of $1,100 per acre.

The growth in land values appeared to reflect the historically strong price of the predominant crops in Iowa and the Midwest - corn and soybeans. Crop land value in the southeast and northeast decreased slightly over 1 percent.