2015 land values show smaller drop

Zhang, who took over management of the survey from long-time ISU economist Mike Duffy, says lower crop prices and other economic factors point toward lower land prices.

But he says farmland values are not a bubble and show no indication they are going to suddenly burst.

Instead, he says, the values reflect commodity prices and other economic factors. Unless there is a change in the economic picture for farmers in the near future, those land prices are likely to continue to decline but not drop off a cliff in the next several years.

The Iowa Land Value Survey, conducted by Iowa State since 1941, is now conducted by the Center for Agricultural and Rural Development and ISU Extension.

This year’s survey, conducted in November and reflecting Nov. 1 values, showed farmland levels continued to decline this past year, but the rate of decline slowed, compared to the 8.9 percent drop the previous year. Those two years followed the historic run-up in land values the previous four years.

This year did mark the first time since 2000 that the survey showed a drop in values for two years in a row.

Values fell more for high-value land than for pasture or low-value farmland, but that simply reflects the fact high-value farmland also shot up at a faster rate in previous years, Zhang says. It also reflects the fact there may be more options for buyers of lower-value land, such as Conservation Reserve Program (CRP) contracts or use for hunting or other recreational purposes.

High-quality land averaged $9,364 for the state, down 5 percent (or $490 per acre). Medium-quality land declined 3.2 percent to $7,127 per acre. Low quality land went down 0.9 percent to $4,834 per acre.

THIS YEAR’S survey indicates values slipped in eight of the state’s nine crop reporting districts. The exception was Northwest Iowa, where values rose 0.7 percent to $9,685 per acre. The largest drop came in North Central Iowa, where prices dipped 6.7 percent to $7,962 per acre.

Northeast Iowa prices dropped 3.6 percent to $7,861 per acres; West Central Iowa fell 4.3 percent to $8,061 per acre; Central Iowa slipped 6.4 percent to $8,505 per acre; East Central Iowa dipped 5.5 percent to $8,515 per acre; Southwest Iowa fell 2.2 percent to $6,372 per acre; South Central Iowa went down 1.7 percent to $4,397 per acre; and Southeast Iowa slipped 4.5 percent to $6,892 per acre.

Zhang says Northwest Iowa was likely buoyed by strong livestock prices. High yields this year may have also helped keep prices from falling further in the state.

Existing farmers still comprise about 75 percent of buyers, with investors accounting for about 20 percent. Buyers cite low interest rates, limited land availability, high yields and cash availability.

Negatives cited by survey respondents include low commodity prices (by far the largest factor), higher input costs, some issues with credit availability and an uncertain agricultural future.

The bottom line, Zhang says, is that prices shot up in previous years and appear to be gradually dropping now. That decline is likely to continue in the next several years unless economic conditions change, he says, but a crash is unlikely.

“I DON’T think you’ll see a large crisis as you saw in the 1980s,” he says.

This year’s survey did include some new questions regarding predictions for the future, Zhang says. It showed only 4 percent of respondents expect Iowa farmland values to go up next year while 19 percent expect values to remain the same and 77 percent expect them to fall. But only 6 percent expect them to fall more than 10 percent.

When asked for predictions of farmland values five years from now, 31 percent predicted an increase, 17 percent predicted they would stay the same, and over 51 percent expected a decline.

Full results from the Iowa Land Value Survey, including interactive maps and charts are available at http://www.card.iastate.edu/farmland/.