Iowa land values, tumbling for second year, fall 3.9%

Iowa farmland values dropped 3.9 percent this year to a statewide average of $7,633 an acre, and the outlook for a near-term rally is dim, according to an Iowa State University survey.

It was the second straight year of decline, with farm profits squeezed by low corn and soybean prices and high costs for seeds, fertilizer and other inputs.

Iowa farmland values peaked in 2013 at $8,716 an acre but have fallen nearly 13 percent since. Last year, farmland values dropped 8.9 percent, according to the Iowa Land Value Survey. ISU surveyed real estate brokers and appraisers, farm managers and ag lenders in November.

Farmland values may not rebound soon, given "stagnant commodity prices, declining farm income forecast, a slowing Chinese economy, and a potential increase in interest rates," Wendong Zhang, an assistant ISU economics professor, said in the report.

“It will most likely be an orderly adjustment as opposed to a sudden bubble burst," he said.

Nationally, farm income is projected to decline 38 percent this year. In Iowa, farm income declined 39 percent last year to nearly $5.1 billion, data from the U.S. Department of Agriculture showed.

Zhang said most Iowa farmers "will be able to weather the storm as the market prices find a new equilibrium.

"But farmers and land owners who bet on the high commodity prices lasting and aggressively expanded or borrowed heavily will face significant problems in the months ahead,” he said.

This year's retreat was less severe than experts anticipated, Zhang said. Some farmers still have strong balance sheets, livestock profits are robust, and hunters and other recreational users have pushed demand.

Despite the decrease, Zhang said farmland values are still more than twice the reported values from a decade ago and almost 14 percent higher than 2011 values.

Scott County land had the highest average value at $10,918 per acre, even after falling 6 percent. Decatur County's average land value was the lowest at $3,514, falling about 2 percent from last year.

Only seven counties showed gains in farmland values: Lyon, Osceola, Dickinson, O'Brien, Allamakee, Clayton and Dubuque.

The largest percentage declines occurred in north central Iowa: Worth, Mitchell, Cerro Gordo, Floyd, Butler, Grundy and Black Hawk all dropped more than 7 percent.