Minding Ag's Business

Iowa Farmland Values Approach a Plateau as Annual Increase Slows to 3.7%

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
Iowa State University's Land Values Survey showed a range of regional conditions. The northwest district reported a small decline in values, while values in the southeastern district increased by 12%. (Image from 2023 ISU Land Value Survey press conference broadcast on YouTube)

MT. JULIET, Tenn. (DTN) -- The surge in Iowa farmland values slowed in 2023, but the continued climb set new records.

On average, it cost $11,835 to buy an acre, according to Iowa State University's annual Land Value Survey. That's a 3.7% increase from 2022, but pales in comparison to the 17% gain in 2022 or the 29% increase in 2021.

"We are still seeing values increase, but it's a lot more modest, and it has slowed down," said ISU Extension Economist Rabail Chandio in a press conference that was broadcast on YouTube.

The number of farms for sale in 2023 dropped from the year before, and the limited supply was met with plenty of interested buyers, which should continue to provide a firm level of support to prices, she said.

ISU first conducted the survey in 1941 and began including county estimates in 1950. Each year, it surveys bankers, real estate professionals, appraisers, professional farmland managers and others about the land sales in their area. This year, the survey found that by class, land prices averaged:

-- High quality, $14,296 per acre. Up 3.5%

-- Medium quality, $11,075 per acre. Up 3.8%

-- Low quality, $7,664 per acre. Up 4%

In a webinar where she presented her results, Chandio said this year's survey highlighted some regional changes.

The northwest region, for instance, has the highest average land value in the state, $14,753 per acre, but that's down about $125 from last year. Chandio cautioned that this decline is small enough to be within the study's margin of error.

"We're not seeing a fall in land values just yet, just adjustments here and there," she said.

The southeast district, however, reported 12.8% gain, or $1,183 per acre. She said this part of the state has more recreational land, and that demand helped boost prices.

"If you are going to buy land for hunting, the land quality, the grain prices or the commodity market, is not really a factor in your purchase," she said. "The rest of the state is more affected by the farm economy, which is why it's reacting first."

Southern Iowa is also where the survey shows the most investor interest, which reflects the hunting value. A lot of agriculture investors are looking for a "fixer-upper."

"When we're seeing sales valued at $26,000 or $30,000 per acre, those are not going to investors because they're not getting a return. They're most likely the long-term farmer that's buying land because it's that specific parcel."

More than 70% of buyers in 2023 were farmers.

As for sellers, 57% were estates and 23% were retired farmers.

That limited supply is one of the factors supporting values, Chandio said. Higher-than-expected yields, strong working capital and good commodity prices all helped, too.

"Interest rates will continue to be a negative factor in the land markets -- even if we stop increasing them or they decrease a little bit -- because the hikes we saw previously have not be absorbed fully just yet," she said. "We are going to see a lot of leftover negative pressure from 2022."

Chandio said she thinks the land market is likely entering into a period similar to the post-ethanol boom, where prices slowly decline or stayed flat. "We're approaching a plateau in the land market."

You can watch Chandio's presentation here: https://www.youtube.com/…

See other recent DTN stories on land values at:

-- "Agricultural Land Market Stays Positive," at https://www.dtnpf.com/…

-- "Agricultural Land Price Boosters," at https://www.dtnpf.com/…

-- "Top 10 States for Ag Land Value," at https://www.dtnpf.com/…

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

Follow her on X, formerly known as Twitter, at @KatieD_DTN


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