Slight decline in land values does not cause concern for Page County farmers

By KENT DINNEBIER, Clarinda Herald Journal

Although the average value of farmland in Iowa declined in 2009 for the first time in a decade, Iowa State University Extension Farm Management Field Specialist said that is not necessarily bad news for farmers in Southwest Iowa.

An annual survey conducted by ISU Extension farm economist Mike Duffy showed the statewide average for farmland as of Nov. 1, 2009, was $4,371 an acre, down 2.2 percent from the 2008 figure of $4,468.
However, in Southwest Iowa the survey showed the average value of farmland only dropped by 1.8 percent from $3,626 an acre in 2008 to $3,559 in 2009.

Eggers believed, when viewed in the context of recent years, the decline of $67 per acre was actually good news for area farmers.

“You have an asset. From 2002 to 2008 that asset doubles in value. We are in the midst of the ‘Great Recession’ with over 10 percent unemployment, emergency capitalization of our lending infrastructure, state ownership of the company that made the vehicle I drove to work today, and perhaps the vehicle you drove to work today, and that asset has lost only 1.8 percent of its value. I’d say that’s cause for celebration,” Eggers explained.

Gordon Kokenge of Clarinda, who owns farmland in both Page and Taylor Counties, agreed the small decline in 2009 values should not create concerns for area farmers.

“That is almost like having no change given the overall economy and the fact that grain prices have dropped from the high levels they were at a couple of years ago,” Kokenge said.

The last time the statewide average dropped was in 1999, when the survey conducted by Duffy reported the average was $1,781 an acre, or $20 less than in 1998. In the decade since 1999, owners of Iowa farmland have watched their holdings increase in value by 145 percent on average.

Duffy said the slight decrease in 2009 in the ISU survey may contain some good news compared to other surveys that look at land values in Iowa.

He noted the 2.2 percent decline covered sales for the time period between November 2008 and November 2009. It compared with a 7.6 percent decrease reported by the Realtors Land Institute for a survey covering the period from September 2008 to March 2009, and a 7 percent decrease from October 2008 to October 2009 reported by the Seventh District of the Federal Reserve Board. The Federal Reserve Board included an increase of 4 percent from July to October of 2009.

“The decrease in land values appears to have stopped,” Duffy said. “The situation has stabilized but for how long is unknown.”

While land values on average declined slightly in 2009, the survey reported that 14 counties showed an increase. The counties with increases included several in east central Iowa where the 2008 flooding held down the gains shown in other parts of the state last year.

Duffy said the recent trends in the value of Iowa land are not surprising given the relative change in the value of crops produced in Iowa over the past few years.

“The value of corn production in Iowa increased 64 percent from 2006 to 2007, but decreased 15 percent from 2007 to 2008 based on year-end summaries by the U.S. Department of Agriculture,” Duffy explained.
Meanwhile, the value of the soybean crop increased 40 percent two years ago and then decreased 9 percent last year. Year-end reports are likely to show additional decline in total crop income, based on crop prices and the difficult harvest, Duffy said.

The survey also found a major decrease in the amount of land sold during the past year. The trend toward greater demand for higher quality land continued, and there also was an increase in the percentage of land being purchased by existing farmers, correlating with the decline in investor land purchases.

“This year’s survey showed existing farmers making over 70 percent of land purchases. Just a few years ago it was less than 60 percent. It hasn’t been over 70 percent for over 10 years. Investors are at about 25 percent and new farmers are at about 5 percent,” Eggers explained.

Kokenge added the fact that neighboring farmers are willing to purchase ground when it becomes available actually strengthens the overall value of land in the area.

“People are a little bit more cautious, but neighboring farmers are still willing to pay a bit more to add on to their land,” Kokenge explained.

Of the nine crop reporting districts in the state, Northwest Iowa reported the highest average value of $5,364 per acre. The lowest average in the state was in South Central Iowa at $2,537 per acre. The only district that showed an increase over 2008 was East Central, up 1.1 percent.

While the average value of an acre of farmland in Southwest Iowa was $3,559 an acre, Eggers said the price varied by more than $2,000 between the high, medium and lowest quality farmland in the region.

“In Southwest Iowa we had $4,539 for the higher quality; $3,386 for the medium; and $2,286 for the low quality farmland. For the nine crop reporting districts across the state this was the second lowest set of numbers,” Eggers said.

Page County came in just below the medium price for Southwest Iowa with an average value of $3,195 per acre in 2009. That price was down only $14 per acre from 2008.

Montgomery County finished with a per acre value that was just above the medium price for Southwest Iowa at $3,476 per acre compared to $3,600 an acre in 2008.

Taylor County saw only a $2 per acre decline in value from 2008 to 2009 as the average price of farmland in that county went from $2,532 per acre to $2,530 per acre.

The highest county average in the state was Scott County at $6,361 per acre, up 0.8 percent from last year when it also was the highest. Decatur County was the lowest at $1,957 per acre. Lyon County led the state with the largest dollar increase at $237 per acre, while Allamakee County had the largest percentage increase at 5.7 percent. The greatest dollar and percentage decreases were $384 and 6.6 percent, both in Black Hawk County.

Low grade land in the state averaged $2,884 per acre, a decrease of $83 or 2.8 percent over the 2008 survey. Medium grade land averaged $4,076 per acre, a $119 decrease or 2.8 percent. High grade land averaged $5,321 per acre, a decrease of $60 or 1.1 percent.

Data on farmland sales have been collected by Iowa State University annually since 1941. About 1,100 copies of the survey are mailed each year to licensed real estate brokers, ag lenders, and other knowledgeable of Iowa land values. Respondents are asked to report values as of Nov. 1. This year, 457 usable surveys were returned, providing 571 individual county estimates, including land values in nearby counties if they had knowledge of values in those counties.

Eggers said respondents indicated factors like lower grain prices, high input costs, the economy, livestock losses and weather placed negative pressure on the land values this year. Meanwhile, respondents said positive factors were low interest rates, grain yields and limited availability of land.

Additional information on the 2009 survey and the archived version of Duffy’s news conference announcing the results are available online at www.extension.iastate.edu/landvalue.