Iowa farmland values dropped nearly 9 percent over past year

Iowa's farmland values dropped 8.7 percent over the past year and have fallen about 25 percent from peaks in 2013, a new survey shows.

The state's average farmland value through September was $6,486 an acre, according to a survey from the Iowa Chapter of Realtors Land Institute. The average value in September 2013 was $8,750 an acre.

All nine crop reporting districts showed year-over-year declines, the survey Wednesday showed, ranging from 6.7 percent in northeast Iowa to 11.7 percent in southwest Iowa.

The report echoes other surveys. For example, the Chicago Federal Reserve reported in August that farmland values in Iowa had dropped 6 percent over the past year.

Land values are expected to continue to fall, due to declining corn and soybean prices, which are at least 45 percent below peaks in 2012, a drought year.

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"We continue to see downward pressure because of low commodity prices," said Kyle Hansen, a real estate broker with Hertz Real Estate Services, a farm management company based in Nevada, Ia.

"Land values will continue to decline until they're supported by the income generated from the property," said Hansen, who compiles the survey, which is based on sales and assessments from about 150 real estate brokers, bankers, appraisers and other farm professionals.

U.S. farm income this year is expected to be 42 percent lower than the peak in 2013, according to the U.S. Department of Agriculture.

The only gains were in non-tilled timber, the report showed. Timber acres climbed between 4.5 percent and 5.1 percent in south-central and southeast Iowa, where buyers seek land for hunting, Hansen said.

One trend supporting farmland values is that there are fewer farms for sale, he said, since many farmland owners sold when values were high.

"We're still seeing strong competition for land, because there's not much available," he said. "People are still willing to pay higher prices, because there aren't other options for buying land in their area."

Low crop prices will batter farm income, USDA says

Farmers are the primary buyers, Hansen said, followed by investors. "We still have good attendance at auctions," he said.

Hansen said farm professionals have seen few distressed sales, despite the decreased profitability in farming. "That doesn't mean we couldn't see more in the future," he said.

"We may see more in the fall and winter," with farmers struggling to post profits over three years, Hansen said.

Previous reports, commentary: Iowa Water Quality Issues Special Report