By DOUG SCHMITZ
Iowa Correspondent

AMES, Iowa — The nine-year rise in Iowa farmland values has ended for the first time since 1999 when the statewide average value per acre dropped by 2 percent to $4,371 per acre by the end of 2009.

According to Iowa State University (ISU)’s annual, year-end survey, the exactly 2.2 percent dip last year is down $97 from 2008’s figure of $4,468 per acre.

“The change in Iowa land values is not surprising, given the relative changes in crop values Iowa has experienced,” said Mike Duffy, ISU Extension farm economist, who’s been conducting the survey for nearly 30 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 the year-end summaries by the USDA,” said Duffy, who looked back to 2006 to find the likely reasons for the decrease.
Moreover, while Iowa soybeans had a 40 percent increase in the crop value from 2006 to 2007, Duffy said the crop suffered a 9 percent decrease in value from 2007 to 2008.

“We don’t know for certain the revenue for 2009, but based on prices and the difficult harvest, it will probably be lower than 2008,” he added.

Released every December, the survey is based on reports by licensed real estate brokers and selected individuals considered to be knowledgeable of land market conditions, with about 1,100 surveys mailed each year, and 500-600 completed surveys returned.

Respondents as of Nov. 1 were asked to report on more than one county if they knew the land markets.

The 2009 survey is based on 457 usable responses providing 571 county land values estimates.

Duffy’s figures were comparable to numbers gathered biannually by the Iowa Farm and Land Chapter of the Realtors Land Institute in Mount Vernon, which showed state farmland values decreasing by 1.9 percent from March through September 2009.

Troy Louwagie, an accredited land consultant and licensed real estate broker for Hertz Farm Management, Inc., said Duffy’s survey results were definitely similar to Hertz’s bi-annual land value survey, which Louwagie conducts every March and September.
“Farmers, for the most part, had good yields and activity did pick up,” he said. “Livestock areas have been hurt the most. It surprised me [that] some of the counties showed an increase. We continue to see investor interest as a hedge against the concern of inflation.” 

But Louwagie said farmers would have had no good alternative investments if they had sold their farms today.

“There have been fewer farms sell than in the past,” he said. “That has also held the value up on good farms.

“We continue to see high-quality farms sell very well,” he added. “In my opinion, medium- to low-quality farms are down 5-8 percent, if not higher. It seems like farmers, buyers and investors are wanting quality.”

ISU has been collecting data on farmland sales annually since 1941. The 2009 survey found a major decrease in the amount of farmland sold during the past year.

Duffy said the trend toward greater demand for higher-quality land continued, along with an increase in the percentage of land being purchased by existing farmers, which correlated with a decline in investor land purchases.

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

Of the state’s county average, Scott County was the highest, at $6,361 per acre, up 0.8 percent from last year when it also was the highest; Decatur County recorded the lowest county average at $1,957 per acre.

In addition, 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.

Duffy said low-grade land in Iowa averaged $2,884 per acre, a decrease of $83 or 2.8 percent over the 2008 survey, with medium-grade land averaging $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.

But Duffy said 2009’s slight decrease in farmland values may actually contain some good news, compared to other surveys that look at Iowa land values – mainly because the 2.2 percent decline only covered sales from November 2008 to November 2009.

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