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(Ames, IA) -- Iowa's farmland values are up over last year, but the rate of increase has slowed. The annual Iowa State University Land Value Survey finds the average price of Iowa farmland is $11,835 per acre. The survey finds values are up 3.7 percent or $424 over last year. This follows a 17-percent increase in 2022 and a near-record 29-percent increase in 2021.
ISU Agriculture Economist Rabail Chandio, says many of the factors that pushed up values last year supported the increase this year as well. “Interest rates were lower through the first half of the year, commodity prices were still elevated, crop yields were a positive surprise despite the weather challenges throughout the growing season, cash and credit availability remained ample and allowed farmers to stay aggressive in the land market, and investor demand grew stronger nudged by inflation concerns and lack of alternative investment options,” she said.
Chandio says the Federal Reserve's efforts to curb inflation by raising interest rates has eased but she expects future interest rate increases, which will continue to slow growth in farmland values.
“It takes a couple of years for interest rates to be reflected in farmland values,” Chandio said. “The impact of the aggressive interest rate hikes of 2022 is expected to be felt more strongly in 2024 and beyond, resulting in much more modest growth or even decreases in land values in the coming years.”
Commodity prices were a commonly cited positive influence on this year’s farmland values. Chandio says they were elevated earlier in the year due to weather and geopolitical uncertainties, but they have decreased as of the end of the year. However, she said, “In terms of their influence on land values, they had a more positive impact on the land markets this year than a negative one.”
Chandio says farmland values in Iowa have hit a plateau after years of increases. "While positive influences were more prominent at the beginning of the year, negative pressures are building as we approach 2024. Barring any unusual activity in the land markets, we may see the curve start to decline in the next year or so,” she said.
The report finds nearly all of Iowa's counties showed an increase in land values. Sioux County topped the list this year with a per-acre value of $16,521, an increase of or $5 per acre, or 0.03%. Decatur County again reported the lowest value, $6,286 per acre; however, Decatur County saw land values increase 12.9%, or $720 per acre, which tied with Appanoose, Wayne, and Lucas Counties as the largest percent increase.
Marion County saw the largest dollar increase, $1,117 per acre. Scott County saw the largest dollar decline in values (a loss of $630/acre) as well as the largest percent decline in values (-3.9%).
The Northwest district reported the highest values for low-, medium-, and high-quality land at $9,497, $13,731, and $16,938 per acre, respectively. Despite the overall 9.6% increase, the South Central district reported the lowest values for low-, medium-, and high-quality land at $5,105, $7,498, and $9,718 per acre, respectively.
Chandio says the biggest factor in the survey result was limited land supply. Other factors include: stronger-than-expected yields, cash on hand/high credit availability, higher commodity prices, strong demand for land, a good farm economy, and favorable interest rates.