(Ames, IA) -- The value of Iowa farmland has hit a new high. Iowa State University's Center for Agricultural and Rural Development finds values are up 17 percent, to $11,411 per acre. Researchers say that's after values rose 29 percent during the previous year.
When adjusting for inflation, the 2022 average value surpasses the previous inflation-adjusted record value set in 2013 for the first time.
Wendong Zhang, an associate professor of economics and faculty affiliate of Center for Agricultural and Rural Development (CARD) at Iowa State University, says inflation did not play as much of a factor in the increase as commodity prices, limited land supply, and low-interest rates through summer 2022 did this year.
Zhang conducts the annual survey and says inflation rates this year are similar to those from last year, but the Federal Reserve has used aggressive rate hikes since this summer to curb the problem. “The Federal Reserve seems to be determined to keep raising interest rates until they get a firm control on inflation. This is a tricky balance because larger and quicker interest rate hikes run the risk of slowing down the economy, potentially to a recession,” Zhang said. While he noted that higher interest rates put downward pressure on the land market, the effects typically don’t show up in land prices for one or two years.
Zhang says 81% of Iowa farmland is fully paid for, so the rising interest rates don’t always affect farmers’ land purchasing decisions. This is especially true when high inflation makes the real interest rates negative or low, which tends to incentivize more borrowing and investment. Furthermore, a significant portion of respondents said that cash on hand was a positive factor influencing land values. “Farmers have a lot more cash on hand and supply chain issues led to a shortage of equipment, so the money that farmers normally spend on equipment is now devoted to land,” he said.
Zhang says commodity prices have been strong this year and yields have been higher than expected, despite the weather challenges. “Not only are crop prices are much higher, livestock and poultry prices are also significantly higher, translating into higher farm income and profits,” he said.
Additional findings:
Land Values by County
For the second year in a row, all 99 of Iowa’s counties showed an increase in land values. However, for the first time in almost a decade, Scott County did not report the highest overall value. O’Brien County topped the list this year, reporting a 20.6% increase, or $2,818 per acre, to $16,531. Decatur County again reported the lowest value, though land values there increased 10%, or $505 per acre, to $5,566.
Mills, Fremont, Page, and Montgomery Counties reported the largest percentage increase, 21.6%, while O’Brien County saw the largest dollar increase, $2,818 per acre. Wayne, Lucas, Appanoose, and Decatur Counties saw the smallest percentage increase, 10%, while Decatur County saw the smallest dollar increase, $505 per acre.
Land Values by District
Land values increased across all crop reporting districts. The Northwest district reported the highest overall value, $14,878 per acre, the largest percentage increase, 22.3%, and the largest dollar increase, $2,714 per acre.
The South Central district reported the lowest values, $6,824 per acre, and the lowest dollar change, $790 per acre, while the Southeast district saw the smallest percentage increase, 9.8%.
Land Values by Quality
Statewide, low-quality land now averages $7,369 per acre, an increase of 15.2% or $972 per acre. Medium-quality land now averages $10,673 per acre, an increase of 17.7% or $1,602 per acre. High-quality land now averages $13,817 per acre, an increase of 16.8% or $1,983 per acre.
The Northwest district reported the highest values for low-, medium-, and high-quality land at $9,569, $13,710, and $17,121 per acre, respectively. The South Central district reported the lowest values for low-, medium-, and high-quality land at $4,379, $6,872, and $9,478 per acre, respectively.
Low-quality land saw the largest percent increase in the Northeast district, 19.8%, while the Northwest district saw the largest dollar increase, $1,481 per acre. Low-quality land saw the smallest percent increase, 7.9%, and the lowest dollar increase, $321 per acre, in the South Central district.
Medium-quality land saw increases of more than 20% in the West Central, Northeast, Southwest, and Northwest districts, which respectively showed increases of 20.1%, 21.9%, 22.7%, and 24.2%. The Northwest district also saw the largest dollar increase in medium-quality land, $2,688 per acre. The Southeast district showed the lowest percent increase in medium-quality land, 6.2%, and the lowest dollar increase, $508 per acre.
High-quality land in the West Central, Southwest, and Northwest districts all saw increases of more than 20%—20.6%, 21.2%, and 22.3%, respectively. The Northwest district reported the largest dollar increase in high-quality land at $3,124 per acre. The Southeast district reported the smallest percent change in high-quality land, 10.3%, and the smallest dollar increase, $1,201 per acre.