2012 Iowa farm and rural life poll: land values
The 2012 Iowa Farm and Rural Life Poll was recently released, and this year it focused on a number of topics of likely interest to AgDM readers. "The steady and steep increase in agricultural land values has been a topic of much discussion in recent years, and the 2012 Farm Poll aimed to get a handle on what Iowa farmers think about the issue,” said J. Gordon Arbuckle, Jr., a sociologist with Iowa State University Extension and Outreach. “I worked with (ISU Extension and Outreach agricultural economist) Mike Duffy, who is the leading expert on the subject, to develop some questions to try to understand where farmers think land markets are heading, what has been driving increases and what some of the impacts on farming have been.”
Many farmers appear to believe that farmland is overvalued and eventually the market bubble will burst, according to the 2012 Iowa Farm and Rural Life Poll.
“The value of farmland in Iowa and across the Midwest has risen steeply over the past few years,” said Arbuckle. “We wanted to know what farmers are thinking about those increases.” Arbuckle co-directs the annual Iowa Farm and Rural Life Poll with Paul Lasley, another ISU Extension and Outreach sociologist.
“In the 2012 Farm Poll, we asked farmers to share their perspectives regarding the future trajectory of land values and farm income, as well as their opinions about the relative importance of several factors that are driving increases in land values,” Arbuckle said. “We also asked them to rate how much they agreed or disagreed with a series of statements about potential impacts of rising land values on farming.”
Arbuckle said 1,296 farmers participated in the 2012 Farm Poll and on average they were 64 years old. Fifty-one percent earned more than half of their income from farming, while an additional 18 percent earned between 26 and 50 percent of their household income from the farm operation.
The future of land values
As shown in Table 1, more than two-thirds of the farmers agreed that current land values are too high, cannot be sustained and are much higher than the land is actually worth. Forty-eight percent agreed that the farmland market is in a bubble that will eventually burst and lead to major drops in values. Only 10 percent believed that land values would continue to rise at double-digit rates.
“Other farmers were more optimistic,” Arbuckle said. “Forty-one percent believed land values would continue to rise, though at a slower pace. Further, 60 percent of survey participants agreed that quality Iowa cropland is still a good investment.”
Drivers of increases
Farmers were asked to rate the influence of several factors on the recent escalation of land values, shown in Table 2. “They indicated that high grain prices are the strongest driver of increases in land values, followed by competition between local farmers who want to expand their land base,” Arbuckle explained.
Farmers also see the investment potential of farmland as a driver for rising land values, Arbuckle continued. “About two-thirds of farmers indicated that low returns on other types of investments are a strong or very strong influence. Other investment-related factors were rated somewhat lower on the influence scale: about half of farmers rated the influence of individual investors or institutional investors as strong or very strong.”
Arbuckle noted that other factors were rated as strongly influential by half or fewer farmers: greed (52 percent), increased global demand for food (50 percent) and ethanol production (45 percent). The lowest-rated factor was purchase of land for hunting or recreational purposes.
Impacts of increases
“We also asked farmers several questions to gauge their opinions about how increases in land prices have impacted farming,” Arbuckle said. “Ninety-six percent agreed that rising land values have driven land rents higher, and just over 90 percent agreed that increases have made it tougher for the next generation to enter farming.”
Eighty-two percent agreed that it is more difficult to expand operations, and 70 percent agreed that increases have made it harder to pass farms to the next generation, he said.
Seventy-one percent of survey respondents agreed that rising land prices have intensified farming, and 43 percent believed that high land prices have led to “mining” of the soil, Arbuckle said. “Farmers don’t seem to believe that increases in land value are resulting in better land stewardship: just 23 percent of farmers agreed that commitment to soil conservation has increased along with land values; nearly half - 49 percent - disagreed.”
Two survey items focused specifically on potential benefits, Arbuckle said. Fifty-four percent of respondents indicated that non-operator landowners have benefited from increases in land values more than farmers have. Forty percent of farmers agreed that land value increases have benefitted farmers.
About the Iowa Farm and Rural Life Poll
Conducted every year since its establishment in 1982, the Iowa Farm and Rural Life Poll is the longest-running survey of its kind in the nation. ISU Extension and Outreach, the Iowa Agriculture and Home Economics Experiment Station, the Iowa Department of Agriculture and Land Stewardship, and the Iowa Agricultural Statistics Service are partners in the Farm Poll effort.
The 2012 Iowa Farm and Rural Life Poll summary report (PM 3036) and previous Iowa Farm and Rural Life Poll summary and topical reports are available to download from the ISU Extension and Outreach Online Store, and Extension Sociology.