The value of an average acre of good Iowa farmland has fallen for the second consecutive year, according to a survey released Monday.
Average Iowa farmland values are estimated at $7,633 per acre, down $310, or 3.9 percent, since last year’s survey by the Center for Agricultural and Rural Development at Iowa State University and Iowa State University Extension and Outreach. Results of the survey, conducted in November, are similar to what has been reported previously by the Federal Reserve Bank of Chicago, and the Realtors Land Institute.
The value of an average acre of good Iowa farmland value hit a historic peak of $8,716 per acre in 2013, but declined 8.9 percent to $7,943 the following year. The drop in value this year is smaller than that of last year, but marks the third time values have fallen since 2009.
Wendong Zhang, assistant professor of economics at ISU, said the 3.9 percent decline may seem less than what many people speculated, but it’s not out of line. Zhang cited a mix of factors, including a lot of cash in hand for many farmers, market expectation of the decline early on, robust livestock returns and strong recreational demand.
Of respondents that listed positive or negative factors influencing farmland values, low interest rates and high yields were the most commonly cited positive factors and lower commodity prices were the most frequently cited negative factor.
With stagnant commodity prices, declining farm income forecast, a slowing Chinese economy and a potential increase in interest rates, Zhang said in a news release that the Iowa farmland market appears to have peaked for the foreseeable future.
“It will most likely be an orderly adjustment as opposed to a sudden bubble burst,” Zhang said. “Most farmers will be able to weather the storm as the market prices find a new equilibrium. Farmers and land owners who bet on the high commodity prices lasting and aggressively expanded or borrowed heavily will face significant problems in the months ahead.”
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For the third year in a row, Scott County in Eastern Iowa reported the highest average value at $10,918 per acre. That represented a decline of about $700 per acre, or 6 percent, from last year.
Decatur County reported the lowest average value of $3,514 per acre, a drop of $73, or about 2 percent, from last year’s report.