Value of good Iowa farmland rises, despite record drought

The value of an average acre of good Iowa farmland jumped 7.7 percent in the last six months, despite a record drought that has decimated crop yields in some areas.

The Iowa Farm and Land Chapter of the Realtors Land Institute on Thursday reported that the average sale price of an acre of good unimproved Iowa farmland was $10,445 on Sept. 1, up from $9,644 on March 1.

Combined with the 10.8 percent  increase reported in March, the average sale price of good Iowa farmland soared 18.5 percent for the year, from Sept. 1, 2011, to Sept. 1.

All nine Iowa crop reporting districts showed an increase for the last six months with the highest posted in southwest Iowa at 10.8 percent. The west central district reported the highest average price of $11,475 per acre.

East central Iowa recorded a 6.4 percent rise over the last six months with an average price of $10,384 per acre. Northeast Iowa posted an 8.3 percent increase since March with an average price of $11,154 per acre.

The Realtors Land Institute cited a number of factors contributing to the continued rise in farmland values, including:

• Strong commodity prices of $7 per bushel for corn and $15 per bushel for soybeans
• Favorable long-term interest rates
• Limited amount of land offered for sale.

Lee Vermeer, vice president of real estate operations for Farmers National Co., said the drought that has affected a large portion of the nation's corn and soybean growing regions did not play a major role in farmland sale prices.

"I realize that we do have a drought, and in some areas it's very severe, but for those farmers who have insurance the coverage is very good," Vermeer said. "If they have strong levels of insurance in place, they're going to hold their money together for the most part this year, and they're looking at very strong commodity prices again for next year.

"They continue to hold their optimism."

Vermeer said many farmers still have cash reserves from past years and that provides a very strong impetus to add land to their operations.

Looking ahead to the next six months, Vermeer continues to see higher farmland prices, given projected corn and soybean prices and very strong demand for the scarce amount of good quality farmland being offered for sale.

"We're expecting to see another increase of between 5 percent and 10 percent this year," he said.

The Realtors Land Institute cited concerns that could affect future farmland values, including higher costs for seed and fertilizer, an increase in long-term interest rates, larger amounts of land being offered for sale, and continued uncertainty regarding  the U.S. and world economy.

"We are definitely in a world economy because that is our market," Vermeer said.

"China is a big factor in that there are rumblings that it is having problems with its economy. China buys 25 percent of our soybean production."