Iowa land values show stability

Favorable interest rates, a strong demand for land and substantial government payments helped stabilize Iowa’s farmland market in a year in which Iowa’s farmers faced the destructive onslaught of a derecho, significant uncertainties in U.S. agricultural trade and a pandemic that significantly altered market demand.

“The land market faced downward pressure initially with the onset of the COVID-19 pandemic, which lowered food demand and resulted in declines in livestock and ethanol prices,” said Wendong Zhang, assistant professor in economics and extension economist at Iowa State University.

This year’s Iowa Land Value Survey found that the average statewide value of an acre of farmland is $7,559, an increase of 1.7%, or $127, since 2019. The $7,559 per acre estimate, and 1.7% increase in value, represents a statewide average of low, medium and high-quality farmland.

Statewide, Iowa’s high-quality farmland saw a decline in value of 0.1%. However, Zhang said that it’s important to note that number is more indicative of a flat market, rather than a decline, and that several factors have led to a recent rebound in the market.

In mid-November, both U.S. corn and soybean prices reached their highest point so far this year. Despite some decline since then, both prices are still higher than at the beginning of the year, especially soybeans.

Additionally, Germany, a key competitor for U.S. pork exports, is now battling with African swine fever, the same disease that decimated China’s hog industry, which could increase U.S. pork exports in the future.

Zhang also said that farm payments in 2020 helped prop up the farmland market “in a big way.”

According to the USDA’s Economic Research Service, farm payments will increase 107% in 2020, mostly due to supplemental and ad hoc disaster assistance for COVID-19 relief. They also project net farm income will increase 43.1% in 2020.

Some of the increase in overall value this year is also due to increased demand for low-quality land in certain parts of the state. The overall average increase in farmland value was very modest, but low-quality land in the Northeast, West Central, South Central and Southeast districts saw increases of 8% or more.

“Strong demand for pasture and timber grounds, which are even more appealing now with social-distancing requirements, contributed to the rise in low-quality land value,” Zhang said.

However, he noted that when compared to high-quality land, it doesn’t take a substantial change in the dollar value of low-quality land to constitute a large percent increase in values.