By DOUG SCHMITZ
Iowa Correspondent

MOUNT VERNON, Iowa — Iowa farmland values rose nearly 7 percent since March, increasing the statewide average to $396 per acre, with soaring commodity prices and ever-increasing demands placed on the state’s biofuel industry as the driving factor.

“I believe the specific aspect that has attributed to the increase in farmland values is the higher commodity prices for corn and soybeans, which has added more profitability to farming,” said Troy Louwagie, a land consultant with Hertz Farm Management, who conducts the survey for the Iowa Farm & Land Chapter No. 2 Realtors Land Institute.

Released last month, the biennial survey asks respondents – made up primarily of Iowa farm Realtors – to estimate farmland values in three categories based on its potential for corn production: high quality, medium quality and low quality.

The survey indicates the state’s average cropland values increased 17.6 percent over one year ending Sept. 1 – with the biggest increase of 11 percent occurring between Sept. 1, 2007, and March 1, 2008 – the fourth-highest one-year figure recorded since the Institute began its survey in 1978. Statewide, the average increase for high-quality cropland was $5,619 per acre in September, up from $5,223 in March.

The biggest average increase was in 2007, when average farmland values rose 20.7 percent for the year ending Sept. 1, 2007. The second highest increase (20.2 percent) occurred during the year ending March 1, 1988. The last six months of that year had the highest increase (18 percent).

The survey divides Iowa into nine reporting districts, with all districts showing an increase in farmland and pasture values. Only five indicated a decline in the value of timberland over the past six months, with respondents showing less interest in recreational land.

In three of the reporting districts, high quality farmland was valued at more than $6,000 per acre: west-central ($6,193 per acre), northeast ($6,071) and central ($6,016 per acre). For medium quality farmland, the statewide average was at $4,528 on Sep. 1, with prices ranging from $3,301 in south-central Iowa to $5,173 in west-central Iowa. For low quality, the survey said the statewide average value was $3,536 on Sept. 1, varying from $2,746 in south-central Iowa to $4,108 in northwestern Iowa.

According to the survey, northeastern and southwestern Iowa had the biggest increases in farmland values since March, with northeastern Iowa hitting 8.5 percent. Over the past six months, the size of the increase in Iowa farmland values varied from 2.7 percent in east-central Iowa to 8.7 percent in southwestern Iowa.
“We believe this is due to the excessive amount of rain we had this spring and summer,” Louwagie said of why the east-central Iowa was so low. “We are a little unsure as to what these crops will yield.”
The survey stated the next smallest increase was in north-central Iowa, which also suffered excessive rainfall, with only an increase of 4.6 percent.

Mike Duffy, Iowa State University agricultural economist, who conducts an annual year-end farmland survey for the state, said the results of the Institute’s survey “were right in line with what I had been expecting.

“The one thing that does show up, however, is the importance of income,” he said. “East-central Iowa was up the lowest percentage, and this was the same area that was devastated by the floods and will see reduced incomes.

“Commodity prices impact income, and income is the determinant of farmland values. As income increases, so will values.”
The survey indicated that Iowa farmers are still the main purchasers of the state’s land. “More farmers are buying farmland and we have fewer 1031 exchange buyers today than we have had in the past,” Louwagie said.

Duffy added there are many different kinds of investors buying land.

“Some are out of state and some are just people within Iowa who see land as a place to invest,” he said. Although he hasn’t set a specific date for his survey’s release in December, he said the results would parallel the Institute’s estimates.

“But we will have to see how the (Congressional) bailout impacts the land market,” he said. “We will also have to wait and see how the crop comes out. My early reports are that there might not be as much out there as some people think.”