Farmland market continues gradual decline

A new report shows farmland values continue a gradual decline in Iowa and the Midwest, but could shift at the end of the based on farmers' income.

The average sale price of an acre of high quality Iowa farmland fell to $11,000 this month from $12,250 in June 2014.

'Harvest results will make 2015 a pivotal year, which could impact the land market for several years,” said Randy Dickhut, vice president of real estate operations at Omaha-based Farmers National Co., in a news release. 'Farm income will drive the direction. A great deal could happen between now and November.”

Dickhut says profit margins are depressed due to lower corn, soybean and wheat prices and steady input costs. He believes higher grain prices this fall would stabilize land values, but lower prices could further depress farmland values.

While the U.S. Department of Agriculture has forecast that farm profits will be lower this year affecting annual cash flows, Dickhut said agriculture overall remains financially strong due to past profits.

'Location and quality of the land continue to be the main drivers of pricing for individual sales. Market stability is maintained by a lower supply of land for sale, contrasted with a continued demand for quality properties.”

Farmers National statistics show the volume of farmland for sale is down 40 percent over the past six months, compared with the past two years.

'The current level of available land is having a real impact on farm and ranch operations looking to expand,” Dickhut said. 'Demand is still good for quality land. The market just isn't as aggressive as in the past few years, so values are drifting sideways to lower.”

The Farmers National report contrasts with a seven-state survey in early May by the Federal Reserve Bank of Chicago.

The value of an average acre of good Iowa farmland edged up 2 percent in the first quarter of this year compared with the fourth quarter of 2014, but fell 6 percent over the last year. Cash rates to lease farmland decreased 10 percent in Iowa in 2015. The decline provided some relief for farmers facing much lower corn and soybean crop prices than in recent years.