Low commodity prices affect Iowa farmland values

The drop in corn and soybean prices has caused land values to continue to soften in Iowa and other Midwestern states.

The average sale price of an acre of high quality Iowa farmland fell $500 from $11,000 in June 2015 to $10,500 in June 2016, according to a survey of Farmers National Co. agents, farmers and ranchers.

'I think the fact that there's a limited amount of land for sale has kept the land values up there,” said Sam Kain, national sales manager for Farmers National based out of West Des Moines.

'When you look at these commodity prices, you would think that we would have bigger decreases in land prices. As long as we continue to have so few farms on the market, it's going to continue to keep land prices up.

'Go back to Economics 101. It's really the law of supply and demand.”

Kain said there still is a strong demand for high quality farmland and a renewed interest from investors.

'Land prices are getting down to where it makes more sense for investors,” he said. 'When prices were really high, the majority of the sales were to farmer buyers.”

Kain non-farm investors are coming back into the farmland market as alternative investments (stocks, bonds and bank certificates of deposit) experience volatility.

'Overall, land is a pretty solid investment,” he said. 'You don't have the ups and downs that you experience with the stock market.”

The Farmers National survey mirrors the results of a survey by the Iowa Chapter of the Realtors Land Institute released in late March. The value of an average acre of good Iowa farmland fell 5 percent from Sept. 1, 2015, to March 1, 2016.

Combined with a 3.7 percent decline from March 1, 2015, through Sept. 1, 2015, the value of an average acre of Iowa farmland has fallen 8.3 percent over the last year.

Troy Louwagie of Hertz Real Estate Services in Mount Vernon said in March that commodity prices are driven by a combination of supply and demand and the weather.

'We're one drought away from strong commodity prices again,” he said. 'Land prices swung too far in one direction and they are coming back.”