Iowa farmland prices see biggest drop in 28 years

Iowa farmland prices fell 8.9 percent in the past year, the largest annual decline in 28 years, according to a report released Thursday by the Center for Agricultural and Rural Development at Iowa State University.

But the average price of $7,943 per acre is still more than double what it was a decade ago, and economists say they expect farmland values to level off.

"Commodity prices and farm income are settling back to more expected levels, and I think land values will probably move sideways for a while," Michael Duffy, a retired Iowa State economics professor who conducted the survey, said in a news release.

"Many people think this report indicates the beginning of another farm crisis, but land values are still considerably higher than they were just a few years ago."

Steve Bruere is president of Peoples Co., a Clive-based land brokerage and management firm. He said he's more optimistic about farmland prices than he was a month ago, thanks to rallying grain prices, particularly corn futures, which are trading above $4 a bushel.

"I don't think the 9 percent drop in land values in itself is going to cause a lot of stress," he said. "If you see corn prices with a 3 in front of it instead of a 4, then I think we'll start to see some pain."

The results of the report, which surveyed the prices of low-, mid- and high-quality farmland in all 99 counties in November, were similar to results from recent farmland surveys by the Realtors Land Institute and the Federal Reserve Bank of Chicago.

This year was only the second time since 1999 that the survey showed a decline in farmland prices.

Scott County, in eastern Iowa, had the highest average farmland price at $11,618 per acre, while Decatur County, in south central Iowa, had the lowest per-acre price at $3,587.

The only region that showed a rise in values was southeast Iowa, which saw a 3.2 percent increase from last year's values.

The overall drop in farmland prices follows a steep decline in crop prices, which peaked at record highs in 2013. A recent U.S. Department of Agriculture estimate showed farm income dropped an estimated 23 percent in 2014.

"Pressure could come if farmers incurred debt in anticipation that commodity prices would continue," Duffy said. "I think all farmers will have a cash-flow problem for the next 18 months or so. If farmers still have equity in their land, they should be able to refinance, but farmers who got overextended will be in trouble."

Bruere said prices of recent farmland sales have varied widely.

"It's just not real consistent," he said. "We've probably sold a dozen farms in the last couple weeks, and some are down more than (9 percent), and some aren't down at all."