By DOUG SCHMITZ
Iowa Correspondent

AMES, Iowa — Iowa farmland values rose 14 percent, or nearly $4,500 an acre, in 2008, increasing for the ninth consecutive year and setting record highs for the sixth straight year, according to an annual survey conducted by Iowa State University.

“Monthly average corn and soybean prices in Iowa had been continually rising until July 2008,” said Mike Duffy, ISU extension farm economist, at a Dec. 16 news conference. He’s been conducting the annual survey for 23 years.

“Corn averaged $5.41 per bushel in July and current prices are below $3. Soybeans averaged $13.10 in July and the current prices are below $8 per bushel,” he said.

Collected annually by ISU since 1941, data from 2008 farmland sales were gathered from about 1,100 surveys that are mailed out each year to licensed real estate brokers, ag lenders and others knowledgeable of Iowa farmland values. For 2008, respondents were asked to report values by Nov. 1, resulting in 479 usable surveys being returned, which provided 625 individual and nearby county estimates.

Duffy said the indicators toward the end of 2008 suggested the upward trend may be slowing as the national economy battles recession pressures – with values doubling since 2003, from $2,275 to $4,468 an acre in 2008 – and as commodity prices plummeted and production costs rose.

“This change in revenue has been accompanied by substantial increases in the costs of production, especially for fertilizers and seed,” he said.

Duffy said the 2008 average was a $560 increase, which was the second-highest dollar increase recorded over the 67 years ISU has been conducting the survey. The 2007 survey reported a $704 increase, or 22 percent, over the previous year.

“The 2008 figure was an increase of 14 percent over 2007, compared with a 22 percent increase last year,” he said. “Over the past 40 years, the survey has found annual changes ranging from an increase in value of 31.9 percent in 1973 to a loss of 30.2 percent in 1985.”

Duffy said the timing of the ISU survey is especially important this time because of the trends in the national economy last fall.
“There have been considerable changes in the situation in Iowa over the past few months,” he said.

The survey indicated the lower grain prices in recent months and the higher costs of production would mean lower net revenue per acre, which was an indicator that Iowa farmland values will be moderating.

Despite indicators that rapid increases may be coming to an end, Duffy said the ISU survey did show considerable strength in Iowa farmland.

“Land values have almost doubled since 2003, going from $2,275 to $4,468 in just five years,” he said. “In 2008, three counties averaged more than $6,000 per acre. This is the first time any county has averaged over that amount. Similarly, 2008 marked the first time that no county has averaged below $2,000 per acre.”

Duffy said there were some notable changes in other categories from the 2008 survey, with east-central Iowa reporting a significant sales decrease. “Almost half, 44 percent, of the respondents from the east-central crop reporting district reported less sales relative to the same time period from a year ago,” he said.

Duane Johnson of Johnson Auction Sales & Real Estate, Inc. in Vinton, Iowa, said buyers are turning in weak bids because of low Corn Suitability Ratings (CSR).

“The lower CSR land is slower, but (there’s) good demand for higher CSR land,” he said.

Duffy added that declining sales was a reflection of the flooding and other hardships suffered in this area over the past year. South-central Iowa reported a significant decline in sales of 43 percent, perhaps reflecting the relatively soft demand for recreational land.
Of the nine crop reporting districts in the state, northwestern Iowa reported the highest average value, at $5,395 per acre. The lowest average in the state was in south-central Iowa, at $2,573 per acre. West-central was the leader in percentage increase at 19.6 percent, while south-central had the lowest percentage increase at 10.7 percent.

The highest county average in the state was Scott County, at $6,310 per acre, while Decatur County was lowest, at $2,002 per acre. Sioux County led the state with the largest dollar increase, at $891 per acre, while Monona County had the largest percentage increase, at 19.9 percent, the survey noted.

The survey also said low-grade land in Iowa averaged $2,967 per acre, an increase of $311, or 11.7 percent, over the 2007 survey; medium-grade averaged $4,195 per acre, a $528 increase, or 14.4 percent; and high-grade land averaged $5,381 per acre, an increase of $695, or 14.8 percent.

Duffy said he views 2008 as “a return to more normal conditions in the land market where the unbridled exuberance we witnessed the past 24 months has been curtailed.

“I think the land values will retreat some from the highs, but not go into the free-fall we witnessed in the 1980s,” he said. “Where land values will go in the next year or so is really anyone’s guess, but, overall, Iowa farmland should remain a good investment for the long run.”