Farmland values setting records

DEWITT – As commodity prices continued their upward trajectory over the last 18 months, land prices have followed suit.

In the East Central Iowa area, which includes Clinton and Jackson counties, values rose 10.2% from September to March, according to the annual Land Trends and Values Survey report recently released by the Iowa Chapter of Realtor’s Land Institute.

And while farm ground auctions in Clinton and Jackson counties have brought some of the highest prices per acre in years, local real estate professionals said rising interest rates will put the brakes on slightly.

“Things are up, but if you look at the state as a whole, values are starting to level off a little bit. Interest rates are starting to creep up,” said Alan McNeil, a sales representative with the DeWitt office of Peoples Company, a national brokerage.

Doug Yegge, a broker with the office who has more than 48 years of experience in the buying and selling of agriculture land, along with McNeil, expect that moves announced by the Federal Reserve to raise rates six times this year will have some impact.

“As commodity prices go, so go land prices,” Yegge said. “But interest rates may have an impact on the future purchase price of land.”

At most of the local land auctions this year, bidders have been a mix of farmers and investors. Statewide, the RLI reported that 65% of farmland buyers are farmers, with investors taking a 35% market share.

“There are a lot of farmer buyers who are big competitors at a lot of these auctions,” Yegge said, noting that most people generally finance about 50% of the deal.

With the Fed’s planned interest rate increases – with some possibly more than 0.25% – financial experts say rates can be expected to increase 2% to 3% this year.

In the past six months, Eastern Iowa has seen some record-setting land prices, with a 75-acre parcel of ground in Jackson County going for $19,900 an acre. An October auction hosted by Yegge and McNeil in Clinton County brought $17,500 an acre.

And while values were strong in East Central Iowa, the increase in land values in the state from September to September was at 29.2%.

According to the most recent RLI survey, high quality crop land in East Central Iowa increased from an average price of $14,091 an acre in September to $15,430 an acre in March.

The survey showed an increase in values in all nine Iowa districts, with a 14.1% increase statewide from September to March, on top of a 26.6% increase from September 2020 to September 2021. In September, the average price for high quality ground in the state was $12,330 an acre, compared with $14,080 an acre in March.

Non-crop acres have shown a similar increase with a 7.9% increase in timberland and 11.8% for pastureland values.

Weather can also play a role in land values.

“Northwest Iowa is really dry, and it’s wet here. Nebraska is really dry and so is Kansas. That can have a big bearing on prices, too,” Yegge said.

Cash prices for corn and soybeans finished substantially higher last year than in the previous year, with the average price of corn at $5.48 a bushel for 2021 compared with $3.48 in 2020 and soybeans at $13.13 a bushel in 2021 compared with $8.98 in 2020, according to Iowa State University’s Extension and Outreach office. Those prices remained as strong or stronger the first three months of this year. In fact, the cash price for corn in March was $6.58 a bushel, while soybeans were $15.

Those prices bode well for land values, McNeil said. Meanwhile, he and Yegge expect land to continue to come available this year for auction and for there to be plenty of interested buyers.

“Death, divorce and taxes always happens,” McNeil said. “Everybody had a good year last year. People have money in pockets to take a stab. There are a lot more buyers than there were a few years ago. It’s tough to predict, though. Every year is a little different.”