Floods' Impact on Land Values

Floods Affect Specific Farm Values, but not Overall Trend

Elizabeth Williams
By  Elizabeth Williams , DTN Special Correspondent
After the floodwaters finally went down in 2011, a land-for-sale sign shows how high the waters reached at their peak when the Missouri River flooded farmland in southwestern Iowa. (DTN photo by Elaine Shein)

INDIANOLA, Iowa (DTN) -- Farmers and ranchers hit by March's flooding and blizzard are still trying to assess their damage. Land values will be affected, but only specific to the property and its damage.

"In 1993 flooding on the Mississippi, I had a friend who farmed near a levee that broke and he had 30 acres of sand dumped on his property. With a trackhoe and bulldozer, he got some of it off, but some just became wasteland," recalled Randy Dickhut, senior vice president with Farmers National Company in Omaha.

Much depends on if the floodwater left trash, which is more easily removed, or sand. "In the Missouri River flood of 2011, there were farms left with 4-6 feet of sand. The Army Corps of Engineers wouldn't let them put the sand back in the river or near the river, so farmers made piles of it out in the field and farmed around them," explained Dan Holliman, real estate sales agent with Jim Hughes Real Estate in Hamburg, Iowa.

"And where the river has cut a new channel, that will definitely affect that farm's value," added Holliman.

"Those specific places that get scooped out or are all sand will see lower values," admitted Dickhut. The bottomland has suffered the most in value, noted Jim Hughes, owner of Jim Hughes Real Estate in Glenwood, Iowa.

"But overall, for the bulk of the flooded bare farmland, if the water goes down quickly and after the levees are repaired, it's not going to make as much of a difference to the land's value in the long term," explained Dickhut. However, property buyers will pay closer attention to the quality of the levee and how it is repaired, Dickhut noted.

The worst part now is the waiting to assess the damage. "The flooding started on March 17 and the southern part of the town of Hamburg and the surrounding area is still sitting under 4 feet of water (down from 12 feet)," Holliman told DTN on April 3. "And it's not going to go down much because it can't drain," explained Holliman. "The river is full and there's still more snow up north to come down the river."


"Most landowners and tenants will work together to negotiate something to share the burden of the disaster," said Rod Johnson with United Farm and Ranch Management (UFARM) in Norfolk, Nebraska.

"However, we can't even get to all our farm operators yet, because of the flooding," said Chris Scow with UFARM in Lincoln, Nebraska. "We're trying to figure it all out. Some farms may be forced to go idle one year," Scow added. "Going forward, they may have to be farmed differently and they may produce differently."

Before anything else, cleanup on the rented property will have to be addressed and negotiated between the tenant and the landowner, explained Dickhut with Farmers National. If the land can't be repaired until after the planting season, the tenant and landowner will have to renegotiate the terms of the current year's lease and payment of any rent, said Dickhut.

However, would that disqualify the farm from crop insurance for this year? What are the rules on prevented planting if the disaster occurs before the first planting date? There are a lot of unanswered questions. "And there is a new rumor every 15 minutes on what government aid is available from USDA or FEMA and what restrictions come with that aid," said Hughes.

"Our biggest fear," said Holliman, "is when will the levees get fixed? Do we dare plant a crop or rebuild a home with the levee still unrepaired? What if there is more flooding before the levee is fixed? We've had 14 major breaks in levees along the Missouri River and some are a quarter-mile long. What do we do in the meantime? Where do we live? How do we produce an income?"

In Nebraska, a sticking point in negotiating lower cash rents is high property taxes. Nearly one-third of the cash rent often goes to pay the property tax. "It's not uncommon for cropland that rents for $250 per acre to be charged $80 per acre in property tax," noted Dickhut.

Although crop-share owners don't have to renegotiate, they will also have to work closely with their tenants to try to produce an income from the flooded land. "We still have a lot of crop-share landowners as clients," said Scow with UFARM in Nebraska. "This will be a tough year. And this may move some owners to switch to lower-risk cash-rent next year."

"What we learned [from the Missouri River flooding in 2011] is that it's hard to catch back up after a disastrous flood. It takes a lot of time and money. And there's not a lot of money in farming right now," explained Holliman.

"Most landowners will be understanding," said Johnson with UFARM in Norfolk. "It will be tough for the next year or two, but if grain prices improve, it should lift the outlook of most farmers and landowners."


Editor's Note: See the business blog "Talk with Lender to Cope with Disaster" for some tips on what farmers coping with disasters should discuss with their lenders.


Elizabeth Williams can be reached at Elizabeth.williams@dtn.com


Elizabeth Williams