Updated December, 2020
2020 Farmland Value Survey Iowa State University
The Iowa State University Farmland Value Survey was initiated in 1941 and is sponsored annually by Iowa State University. Only the state average and the district averages are based directly on ISU survey data. County estimates are derived using a procedure that combines ISU survey results with data from the US. Census of Agriculture. Since 2014, the survey has been conducted by the Center for Agricultural and Rural Development in the Department of Economics at Iowa State University and Iowa State University Extension and Outreach.
The survey is intended to provide information on general land value trends, geographical land price relationships, and factors influencing the Iowa land market. The survey is not intended to provide a direct estimate for any particular piece of property.
The survey is an expert opinion survey based on reports by licensed real estate brokers, farm managers, appraisers, agricultural lenders, county assessors, and selected individuals considered to be knowledgeable of land market conditions. Respondents were asked to report for more than one county if they were knowledgeable about the land markets. The 2020 ISU Land Value Survey is based on 707 usable county-level land value estimates provided by 484 agricultural professionals.
Of the 484 respondents, 67% completed the survey online. Online responses allow participants to provide estimates for up to 13 counties. A web portal has been developed to facilitate the visualization and analysis of Iowa farmland values by pooling data from ISU, USDA, Federal Reserve Bank of Chicago, and the REALTORS® Land Institute, as well as by making use of charts over time and interactive county maps. The portal can be accessed at www.card.iastate.edu/farmland.
Participants in the survey are asked to estimate the value of high-, medium-, and low-quality land in their county. Comparative sales and other factors are taken into account by the respondents in making these value estimates. This survey is the only data source that provides an annual land value estimate at the county level for each of the 99 counties in Iowa. In addition, this survey provides estimates of high-, medium-, and low- quality land at the crop reporting district and state level.
The 2020 state average for all quality of land was estimated to be $7,559 per acre as of November 1, 2020. This is an increase of $127 per acre from Nov. 2019, and a 1.7% increase.
Major factors Influencing the Farmland Market
Most survey respondents listed positive and/or negative factors influencing the land market. Of all respondents, 73% listed at least one positive factor, and 70% listed at least one negative factor. In most cases, respondents listed multiple factors.
There were three positive factors listed by over 10% of respondents who provided at least one positive factor. The most frequently mentioned factor was favorable interest rates, mentioned by 26% of respondents. Limited land supply and recent commodity price rallies were the second- and third-most frequently mentioned positive factors, mentioned by 17% and 13% of respondents, respectively. Other frequently mentioned positive factors included COVID-related payments (8%), government payments (7%), and strong demand, especially by farmers (7%).
There were also three negative factors listed by more than 10% of respondents who identified at least one negative factor. The most frequently mentioned negative factor affecting land values was lower commodity prices, mentioned by 25% of respondents. Uncertainty due to the COVID-19 pandemic and weather uncertainty, such as the derecho, were the second- and third-most frequently mentioned negative factors, mentioned by 12% and 10% of respondents, respectively. Political uncertainty related to the 2020 election, poor yields, and general economic uncertainty were each mentioned by 4–7% of respondents.
Number of Sales Compared to Previous Year
Thirty-eight percent of respondents reported more sales in 2020 relative to 2019. On the other end of the spectrum, just 19% reported fewer sales, and 43% reported the same level of sales in 2020 relative to 2019.
Land Sales by Buyer Category
The 2020 survey asked respondents what percent of the land was sold to five categories of buyers: existing local farmers, existing relocating farmers, new farmers, investors, or other.
The majority of farmland sales, 72%, were to existing farmers, of which existing local farmers capture 69% of land sales. Only 3% of sales were to existing relocating farmers. Investors represented 22% of land sales. New farmers represented 4% of sales, and other purchasers were 2% of sales.
Sales to existing local farmers by crop reporting district ranged from 78% in the Northwest district to 51% in the South Central district.
Sales to investors were highest in the South Central district (34%). The Northwest and Southeast districts reported the lowest investor activity (14%).
Land Sales by Seller Category
The 2020 survey asked respondents what percent of land was bought from five categories of sellers: active farmers, retired farmers, estate sales, investors, or other.
The majority of farmland sales, 51%, were from estate sales, followed by retired farmers at 23%. Active farmers account for 16% of sales, while investors accounted for 9%.
Estate sales by crop reporting district ranged from 64% in the Northwest district to 33% in the South Central district.
Sales by investors were highest in the South Central district (20%). The Southeast district reported the lowest investor sale activity (4%).
Respondents by Occupation and by Mode of Survey
The 2020 survey asked the main occupation of the respondent: farm managers, appraisers, agricultural lenders, brokers/realtors, government, farmers/landowners, and other. This year’s survey also asked about the number of years’ experience of respondents and number of counties where they offer services.
In total, 484 agricultural professionals completed the survey, providing 707 county land value estimates. Of these 484, agricultural lenders represented the largest group, accounting for 38% of all respondents. Brokers/realtors, farm managers, and county auditors or USDA FSA lenders were the next three largest groups, representing 18%, 14%, and 11% of respondents, respectively.
Of all respondents, the percentage of agricultural lenders ranged from 19% in the Central district to more than 45% in the Northwest, West Central, and Southwest districts.
Our respondents, on average, have 27 years of experience in their current profession and offer professional services to an average of eight counties. While government officials typically only serve three counties at most, realtors/brokers, appraisers, farm managers, and agricultural lenders offer services to 17, 15, 10, and 5 counties, respectively.
The survey was completed online by 67% of the 484 respondents. Seventy-one percent of the respondents only provided land value estimates for their primary county and 20% and 9% of the 484 respondents provided estimates for two and three counties, respectively.
Farmland Value and Cash Crop Price Predictions by Respondents
This year's survey asked respondents to predict land values and cash crop prices one and five years from now, as well as the prevailing interest rates for a 20-year farmland mortgage and a one-year operating loan.
Respondents had mixed views regarding the strength of the farmland market one year from now, but in general expect higher land values five years from now. Forty-four percent of respondents forecasted an increase in their local land market in one year, while 23% expected a lower land value and 33% forecasted no change. Looking five years ahead, a vast majority of the respondents (83%) expect a higher land value than current levels, with only 6% forecasting a decline.
Respondents expect a slow-but-steady improvement in both the corn and soybean cash crop markets. In particular, the predicted state average cash corn prices for November 2021 and 2025 (five years from now) are $3.92 per bushel and $4.24 per bushel, respectively. The statewide average soybean price predictions are $9.97 per bushel in one year and $10.59 per bushel five years from now.
Respondents reported typical interest rates for 20-year farmland mortgages and one-year operating loans are 3.94% and 4.60%, respectively. These are significantly lower than one-year-ago levels due to drastic interest rate cuts by the Federal Reserve to combat the COVID-19 pandemic.
Land Quality and Corn Suitability Rating 2
To gauge how each respondent defined high-, medium-, and low-quality land for their county, we asked for estimated average CSR2 (Corn Suitability Rating 2) for high-, medium-, and low- quality land. We also asked for estimates of the percent of land area for each land quality class.
Results in Table 2 show that agricultural professionals have adapted to CSR2. Approximately 89% of participants provided at least one CSR2 estimate for the corresponding land quality classes. The estimated average CSR2 statewide for high-, medium-, and low-quality land is 83, 69, and 54 points respectively. The estimated percent of land area for high-, medium-, and low-quality land is 35%, 40%, and 25%, respectively.
In addition, respondents ranked high-, medium-, and low-quality land based on relative conditions in their region. For example, the average CSR2 for high-quality land in the South Central district is 72, which is only slightly larger than the CSR2 for low-quality land in the Northwest district (65).
Interpretation of the 2020 Survey Results
The 2020 ISU Land Value Survey shows a 1.7% increase in average Iowa farmland values from November 2019 to November 2020. The average statewide value of an acre of farmland is now estimated at $7,559. This modest rise is the third increase in Iowa farmland values over the past six years, and a second consecutive rise. The 2020 land value still represents a 13% decline from the 2013 peak in nominal land values, or a 22% drop in inflation-adjusted values.
The recent increase is largely attributable to record-level federal ad hoc payments, drastic cuts in interest rates by the Federal Reserve, recent surges in agricultural exports and commodity prices, and limited land supply. At the same time, the magnitude of this rise is still modest and represents an overall stable land market as opposed to one in rapid rebound. Many respondents still cited the uncertainty resulting from the COVID-19 pandemic, weather shocks such as the devastating derecho, and political and election uncertainty as negative factors influencing the land market. In general, survey respondents are optimistic about the strength of the future land market.
The 2020 ISU Land Value Survey revealed an overall positive, yet mixed, land value pattern across crop reporting districts, counties, and land quality classes. Local land supply and demand, as well as the local fluctuations in farm income, largely explain the variations across the state. All crop reporting districts, except for the Southwest district, reported an increase in land values—the largest percentage increases were in the West Central and South Central districts, 3.9% and 3.8%, respectively. The Northeast and Northwest districts also reported an increase of 2% or higher. Seventy-eight of 99 counties in Iowa reported a rise in land value, while the remaining 21 counties saw a decline. The largest percentage increase, 7.7%, was reported in Wayne County, while the highest percentage decrease (3.4%) was reported in Henry County.
In general, the results from the 2020 ISU Land Value Survey echo results from other surveys, which all showed relatively stable farmland market trends with recent signs of growth due to recent surging commodity prices and agricultural exports. In November 2020, the Federal Reserve Bank of Chicago reported a 1% increase in Iowa‘s “good” farmland values from October 2019 to October 2020. In September, the REALTORS® Land Institute reported an overall 0.1% increase in Iowa cropland values from September 2018 to September 2019. In contrast, US Department of Agriculture June Area Survey reported a 1.7% decline in Iowa‘s agricultural real estate values (land and building) from June 2019 to June 2020, reflecting uncertainty due to the pandemic.
The 2020 ISU Land Value Survey shows that the majority of farmland sales, 72%, were to existing farmers. Investors represented 22% of land sales. Thirty-eight percent of respondents reported more sales in 2020 relative to 2019, compared to only 19% reporting fewer sales.
The farmland value estimates from the ISU survey are average estimates for all farmland in a county, which includes cropland as well as pasture, CRP, and timberland. Specifically, we asked respondents to estimate “farmland value for average-sized farms in your county as of November 1, 2020.”
An opinion survey is just that - it represents the collective opinion of the survey respondents. Most of the respondents will use actual sales to formulate their opinions but each person can choose to weigh or discount particular sales as they deem necessary. The ISU Land Value Survey is an opinion survey, as are the surveys conducted by Federal Reserve Bank, USDA, and the Realtor Land Institute. It is important to consider the survey respondents, the questions asked, the time period covered, and other factors relating to a particular survey. As a result, it is important to note that when comparing results across surveys for Iowa and neighboring states, it is better to compare percentage change over time as opposed to dollar amount per acre.
The ISU Land Value Survey is intended to provide information on general land value trends and factors influencing the Iowa land market, it is not intended to provide a direct estimate for any particular piece of property. We recommend interested buyers or sellers hire an appraiser to conduct a formal appraisal of particular parcel, go to county assessor websites, or examine recent auction results for comparable parcels in their region.
Farmland has historically been a fairly robust investment that generates relatively stable returns, especially when compared with other investments, such as stocks. This stability becomes even more appealing in 2020, as the stock and bulk commodity markets exhibited substantial volatility with the unfolding of the COVID-19 pandemic. Since 1941, the nominal and inflation-adjusted Iowa farmland values have averaged a 6.4% and 2.5% increase per year, respectively. Farmland values have increased 72% of years, decreased 26% of years, and remained unchanged for three years between 1910 and 2020. While 29% of farmland in Iowa is primarily owned for family or sentimental reasons, the strong robust returns for farmland have, and will continue to, attract interested farmers and investors to invest in the farmland market.
There are several new uncertainties worth watching over the next year or two. First, several of our respondents mentioned the political uncertainty due to the 2020 Presidential and Senate races, and more broadly, what the agricultural, trade, and conservation policy priorities will be under a Biden administration. Key issues include environmental regulations, possible new trade agreements, and policies related to renewable energies and agricultural-climate policies. Second, even with the availability of vaccines, the pandemic’s duration and trajectory are not entirely clear, and the same can be said for the speed of the US and global economic recoveries. Third, China has once again proved itself to be an indispensable trading partner of US agriculture, however, their record level purchases are still projected to fall below the phase one trade deal target. Trying bilateral relations, negative news about the trade deals, and the possible cancellation of commodity shipments will have significant impacts on farm income and land values. Fourth, it is interesting to see whether the farm policy continues on the path of massive federal ad hoc payments, such as trade aid through the Market Facilitation Program or COVID-19 relief through the CFAP program. Arguably, these represent a major redirection of farm policy away from Congress’s decoupling efforts that started with the 1996 Farm Bill. Finally, it is critical to watch for whether the uncertainty posed by the pandemic lead to landowners’ growing interest in selling land, or more stressed sales from financially stressed producers.
This recent modest increase in the Iowa farmland market is a result of lower interest rates, substantial government payments, strong demand, and limited land supply. The increase is modest, but indicates the stability of the farmland market. The interest rate cuts and agricultural export surges will have significant implications on commodity prices, farm incomes, and farmland values. While no one can predict the future, it seems that Iowa farmland values have proved resilient during the pandemic.
More details on the survey can be found on the CARD website, and historical data can be downloaded in the AgDM Decision Tool Historical Farmland Values Data, or in AgDM File C2-72, Historical Farmland Values.
2014 Iowa Farmland Value Survey -- Extension web site dedicated to the ISU Land Value Survey, including information from the 2014 news conference and the presentation by Dr. Mike Duffy.
2013 Iowa Farmland Value Survey -- Extension web site dedicated to the ISU Land Value Survey, including information from the 2013 news conference and the presentation by Dr. Mike Duffy.
2012 Iowa Farmland Value Survey -- Extension web site dedicated to the ISU Land Value Survey, including information from the 2012 news conference and the presentation by Dr. Mike Duffy.
2011 Iowa Farmland Value Survey -- Extension web site dedicated to the ISU Land Value Survey, including information from the 2011 news conference and the presentation by Dr. Mike Duffy.
2010 Iowa Land Value Survey -- Extension web site dedicated to the ISU Land Value Survey, including information from the 2010 news conference and the presentation by Dr. Mike Duffy.
Wendong Zhang, extension economist, 515-294-2536, firstname.lastname@example.org