Extension News

Iowa Farmland Value Reaches New Peak at $2,914 an Acre

Note to media editors:

A video stream of the Dec. 13 news conference is available online at www.extension.iastate.edu/webcast/

PowerPoint slides and other materials used at the news conference are online at  www.extension.iastate.edu/emms/land05/

 

12/13/2005

AMES, Iowa -- The average value of an acre of farmland in Iowa increased $285 to an all-time high of $2,914 in 2005, according to an annual survey conducted by Iowa State University. This is the third year in a row with a new record high, according to Mike Duffy, ISU Extension farm economist who conducts the survey.

The 2005 average value topped a previous record of $2,629 reported last year, and it represented a 10.8 percent increase statewide over the 2004 average. Duffy said values increased in all 99 counties in Iowa, and only 21 counties reported an average increase of less than 10 percent.

Using the average value of $2,914, the total value of the state’s 32.6 million acres of farmland is about $95 billion. Duffy said that the effect of inflation on the value of the dollar means that the 2005 figure is roughly the same as the value of land in 1973, before the run-up in values began that led to a peak of $2,147 in 1981. In inflation-adjusted dollars, the peak arrived in 1979.

After the peak, Iowa land values dropped sharply, reaching a statewide average of $787 per acre in 1986 before beginning to recover. The 2005 figure represents an increase of 270 percent in the past 19 years and 57 percent in the past five years.

Values increased in all 99 Iowa counties and topped $1,000 an acre in every county for the second time since ISU began conducting the survey in 1941. The highest average values in the state were reported in the Central Iowa crop reporting district at $3,415 per acre.  The South Central district had the lowest average values at $1,793, but that district also had the highest percentage of increase at 15.9 percent on average.


The survey of real estate brokers, farm lenders, and others who work directly with the land markets, indicated the increases topped 8 percent in all nine of the state’s crop reporting districts, ranging from 8.6 percent in the Southeast district to 15.9 percent in the South Central crop reporting district. Gains of less than 10 percent were reported in only 21 counties. Seven counties had increases of more than 15 percent. The smallest percentage increase was 3.6 percent in Marshall County, and the largest increase was 24.3 percent in Ringgold County.

The average value increased for the sixth year in a row after slight declines in 1998 and 1999. The largest dollar increase was $540 per acre in Scott County, which also set a state record with an average value of $4,707 per acre. Other counties with an increase of more than $400 per acre included Delaware, Marion, Mills and Audubon.

Duffy said low interest rates were a major factor in value increases this year and were mentioned by 27 percent of those responding to the survey. Other positive factors were good crop yields, mentioned by 26 percent of the respondents; tax-free treatment of transactions involving land exchanges, mentioned by 20 percent; government programs and payments, mentioned by 16 percent; and strong investment demand, mentioned by 12 percent.

Negative factors that worked against greater increases this year included lower current grain prices, listed by 28 percent of the respondents; the high costs of farm inputs and machinery and low profitability in general, mentioned by 16 percent; and an uptrend in interest rates, also mentioned by 16 percent.

Duffy said he is frequently asked whether land values have peaked or whether the market is too high. He said the answers to those questions cannot be determined from the survey, but “it does appear that these concerns are on people’s minds. When you combine several of the similar negative factors mentioned, well over a fourth of the respondents are concerned that the market is too high for profitable farm production,” he said.

Duffy also noted that farmland rental rates have been increasing more slowly than land values over the past several years. Factors that might contribute to stability in land prices include the observation that about 45 percent of the farmland in Iowa is owned by people who do not live on farms, and about 19 percent of those non-farm owners do not even live in Iowa. Duffy said those factors, combined with a survey that showed about three-fourths of Iowa’s farmland is owned without debt, indicate the potential for significant land value declines is less than it was in the early 1980s.

The survey indicated low grade land, which averaged $1,961 per acre in 2005, increased 14.5 percent over the previous year. Medium grade land averaged $2,736 per acre, a 11.4 percent increase, and high grade land averaged $3,511 per acre, an increase of 10.0 percent.

Forty-eight percent of the survey respondents said the number of sales this year was about the same as last year, while 29 percent said there were more sales in 2005, and 23 percent said there were fewer sales. Existing farmers were the buyers in about 56 percent of the transactions this year, with investors accounting for about 39 percent of the sales, new farmers 3 percent, and other purchasers 2 percent.

About 1,100 copies of the survey are mailed each year to licensed real estate brokers, ag lenders and others knowledgeable of Iowa land values. Respondents are asked to report values as of Nov. 1. Average response is 500 to 600 completed surveys, with 483 returned this year. Respondents provided 615 individual county estimates, including land values in nearby counties if they had knowledge of values in those counties.

Only the state average and the averages for the nine crop reporting districts are based directly on data collected in the survey. The county estimates are derived through a procedure that combines ISU survey results with data from the U.S. Census of Agriculture. The ISU survey is the only one of several conducted throughout the year that reports data for all 99 counties.

The survey is sponsored by the Iowa Agriculture and Home Economics Experiment Station at ISU, with results reported by ISU Extension. Duffy was assisted in the project this year by Darnell Smith, extension program specialist in economics.

Additional information on the 2005 survey is available on the ISU Extension Web site at www.extension.iastate.edu/emms/land05/


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Average Land Values By Crop Reporting District:
                                   2005          2004      2004-2005 Change
District                      $/acre        $/acre         $            %
Northwest                  3,393          3,118        274         8.8%
North Central             3,222         2,913        309        10.6%
Northeast                   2,963          2,665        298        11.2%
West Central             3,048          2,728        320        11.7%
Central                       3,415          3,101         314       10.1%
East Central             3,396           3,054         342       11.2%
Southwest                 2,350           2,088        262        12.5%
South Central           1,793           1,547         246        15.9%
Southeast                 2,483            2,286        198          8.6%
State Average           2,914            2,629        285        10.8%

By County:
                      2005     2004        2004–2005
County        $/acre    $/acre   $ Change  % Change

Adair              2,020      1,766      254     14.4%
Adams           1,952      1,697      255     15.0%
Allamakee     1,978      1,789      189     10.5%
Appanoose    1,455      1,270      185     14.5%
Audubon         2,824      2,421      403     16.6%
Benton            3,314      3,015      299      9.9%
Black Hawk    3,636      3,311      325      9.8%
Boone             3,597      3,284      313      9.5%
Bremer           3,345      3,027      317     10.5%
Buchanan      3,289      2,976      313     10.5%
Buena Vista   3,555      3,223      332     10.3%
Butler              3,191      2,900      290     10.0%
Calhoun         3,626      3,302      324      9.8%
Carroll             3,307      3,054      252      8.3%
Cass               2,610      2,279      331     14.5%
Cedar              3,667      3,280      386     11.8%
Cerro Gordo   3,302      2,995      307     10.2%
Cherokee       3,186      2,890      297     10.3%
Chickasaw     2,746      2,523      223      8.8%
Clarke             1,607      1,327      280     21.1%
Clay                 3,281      2,974      307     10.3%
Clayton            2,716      2,430      286     11.8%
Clinton            3,157      2,939      218      7.4%
Crawford        2,880      2,607      273     10.5%
Dallas             3,167      2,947      220      7.5%
Davis               1,676      1,461      214     14.7%
Decatur           1,321      1,104      217     19.7%
Delaware        3,494      3,059      434     14.2%
Des Moines    2,947      2,840      107      3.8%
Dickinson       3,049      2,771      278     10.0%
Dubuque        3,267      2,949      318     10.8%
Emmet            3,380      3,064      316     10.3%
Fayette            3,032      2,671      360     13.5%
Floyd                3,058      2,781      276      9.9%
Franklin            3,273      2,962      312     10.5%
Fremont            2,588      2,342      246     10.5%
Greene             3,154      2,909      245      8.4%
Grundy              3,759      3,493      267      7.6%
Guthrie               2,643      2,388      255     10.7%
Hamilton            3,785      3,442      343     10.0%
Hancock             3,344      2,986      358     12.0%
Hardin                3,387      3,080      307     10.0%
Harrison            2,756      2,460      296     12.0%
Henry                   2,812      2,677      134      5.0%
Howard               2,422      2,190      232     10.6%
Humboldt           3,600      3,260      339     10.4%
Ida                       3,243      2,935      308     10.5%
Iowa                    2,708      2,370      338     14.3%
Jackson             2,724      2,427      297     12.2%
Jasper                2,924      2,687      238      8.8%
Jefferson           2,099      1,916      184      9.6%
Johnson            3,473      3,169      304      9.6%
Jones                3,059      2,883      176      6.1%
Keokuk              2,460      2,281      179      7.8%
Kossuth            3,456      3,119      337     10.8%
Lee                    2,620      2,341      279     11.9%
Linn                   3,661      3,275      386     11.8%
Louisa               2,918      2,579      339     13.1%
Lucas                1,555      1,358      197     14.5%
Lyon                  3,088      2,938      149      5.1%
Madison           2,427      2,136      290     13.6%
Mahaska          2,619      2,362      257     10.9%
Marion              2,563      2,136      427     20.0%
Marshall           3,303      3,187      116      3.6%
Mills                   2,714      2,310      404     17.5%
Mitchell              2,995      2,724      270      9.9%
Monona             2,492      2,251      241     10.7%
Monroe              1,718      1,418      300     21.1%
Montgomery     2,404      2,103      301     14.3%
Muscatine         3,311      2,976      336     11.3%
O’Brien              3,811      3,463      348     10.0%
Osceola            3,261      2,963      298     10.0%
Page                  2,206      1,994      212     10.6%
Palo Alto            3,248      2,937      311     10.6%
Plymouth           3,386      3,064      321     10.5%
Pocahontas      3,547      3,210      337     10.5%
Polk                    3,180      2,893      288      9.9%
Pottawattamie  2,973      2,627      347     13.2%
Poweshiek        2,767      2,518      248      9.9%
Ringgold            1,494      1,202      292     24.3%
Sac                     3,425      3,112      314     10.1%
Scott                   4,707      4,167      540     12.9%
Shelby                2,925      2,614      311     11.9%
Sioux                  3,617      3,434      182      5.3%
Story                   3,679      3,362      317      9.4%
Tama                 3,015      2,760      255      9.2%
Taylor                 1,791      1,629      163     10.0%
Union                 1,927      1,684      243     14.5%
Van Buren         1,850      1,614      236     14.6%
Wapello             2,056      1,969      87       4.4%
Warren              2,716      2,395      321     13.4%
Washington     3,144      2,915      228      7.8%
Wayne               1,485      1,312      172     13.1%
Webster            3,732      3,394      338     10.0%
Winnebago      3,013      2,725      288     10.6%
Winneshiek     2,522      2,269      254     11.2%
Woodbury        2,650      2,395      255     10.7%
Worth               3,025      2,708      317     11.7%
Wright              3,707      3,358      350     10.4%

Contacts :

Michael Duffy, Economics, (515) 294-3000, mduffy@iastate.edu

Del Marks, Continuing Education and Communication Services, (515) 294-9807, delmarks@iastate.edu