Iowa's average farmland values rise to an 80-year high, an Iowa State University report says

Driven by strong yields and high corn and soybean prices, Iowa farmland values skyrocketed 29% this year, averaging $9,751 an acre, the highest in 80 years before adjusting for inflation, a new Iowa State University survey shows.

That's 12% higher than the previous peak in 2013, at $8,716 an acre, ISU reported.

When adjusted for inflation, this year's farmland average fell below 2012 and 2013 values, but "this is still very, very significant," Wendong Zhang, an ISU associate professor of economics, said in a webinar Tuesday.

The last time Iowa's farmland values increased more than 25% was in 2011, when they rose 32.5%.

"Every day, it seems like we’re setting new highs," said Andrew Zellmer, a Peoples Co. farmland broker and president of the Iowa Chapter of the Realtors Land Institute, a group of brokers, appraisers and farm managers.

"There's a hunger for real assets," a movement Iowans can see in the residential housing market, as well, Zellmer said.

Zillow shows a 17% increase in Iowa home values over the past year, Zhang said.

On Tuesday, a farmland auction in northwest Iowa set a record for Sioux County, with 20 acres selling for $25,100 an acre, just shy of the $26,000 state record set near Cedar Rapids in October. The price on the Cedar Rapids land may have been boosted because it lies in the path of potential development, brokers have said.

The remaining 220 acres in the Sioux County sale drew $20,100 to $24,300 an acre.

"Northwest Iowa has been hitting $20,000 an acre-plus for several weeks in a row," said Jim Rothermich, vice president of Iowa Appraisal and Research Corp. in Des Moines. "Today blew past all those auctions. Incredible market conditions."

The strong increases are due to good commodity prices, higher exports, better-than- expected crop yields and low interest rates, Zhang said. Corn prices for Iowa are 60% higher than a year ago, he said, and soybean prices are 32% higher.

U.S. farm income is expected to grow to $116.8 billion by the end of 2021, the highest level since 2013. The higher crop and livestock receipts are expected to offset a decrease in government payments that helped farmers weather trade wars and COVID-19 supply-chain disruptions.

The U.S. Department of Agriculture said this month that it expects direct farm payments this year to total $27.2 billion, down 40% from a record $45.7 billion in 2020.

Zhang said all 99 Iowa counties showed a record nominal value. In 20 counties, the prices were all-time highs even after adjusting for inflation, he said.

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While lucrative for sellers, spiking farmland prices mean farmers who rent cropland can expect to see at least a 10% hike in costs in 2022, Zhang said.

Farmers have been slammed with across-the-board price increases. A Purdue University survey in November shows 43% of farmers expect input prices to rise by more than 16% in the coming year.

Farmers can expect just about everything they need to grow next year's crop — from fertilizer to seed to chemicals — to cost more, said Chad Hart, an ISU agricultural economist.

"My expectation is that we’ll see much higher costs in 2022," Hart said.

Land values also are likely to continue to rise, Zhang said. Farmland brokers, appraisers and other professionals surveyed by ISU concurred.

Roughly 70% of this year's buyers were new or existing farmers, with investors making up nearly 30% of the market.

Zellmer said the state has had a record number of farmland sales this year, with land owners trying to cash in on high prices as well as being concerned about possible changes in tax laws that would leave them with a big bill.

Sales could be slimmer in the first half of 2022, Zellmer said, but the reduced supplies would support continued higher prices.

While farmers might be concerned about a return of the 1980s farm crisis, which followed rapidly increasing land prices, Hart said history shows that's unlikely.

After the farmland spike that occurred from 2011 to 2013, Iowa's values declined very little in the years that followed, though farm income dropped. The largest decline happened in 2014, when values fell nearly 9% from their peak.

"When you think back to the late '70s and early '80s, land values were increasing, but farm income was actually declining," Hart said. "This time, we have land values and farm income moving in the same direction."

ISU said Scott County, home of Davenport, reported the highest average value for the ninth consecutive year, rising 30% to $13,852 an acre. Decatur County, on the Missouri border, had the lowest value — though it was up sharply, rising 31.5% to $5,062 an acre.

Clayton and Allamakee counties in Iowa's northeast corner reported the largest percentage increase, 36.4%, while Scott County saw the largest dollar increase at $3,193 per acre, ISU reported.

The smallest percentage increase, 23.2%, was in Keokuk County, in southeast Iowa, while Taylor County, in southwest Iowa, saw the smallest dollar increase, $1,199 per acre.

Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at deller@registermedia.com or 515-284-8457.

This article originally appeared on Des Moines Register: Average Iowa farmland values climb 29%, Iowa State University reports