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Farmland values jump 23.7 percent in 2012

By Jean Caspers-Simmet

Date Modified: 01/24/2013 12:26 PM

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AMES, Iowa — Iowa farmland values continued their steep climb in 2012, according to the results of Iowa State University's Iowa Land Value Survey.

The survey, which was conducted in November, shows average farmland value is $8,296 per acre, an increase of 23.7 percent from 2011, said Mike Duffy, ISU Extension farm management economist who conducts the survey.

This is the third year in a row that values have increased more than 15 percent.

O'Brien County had an estimated $12,862 average value, the highest average. The county also had the highest percentage increase and highest dollar increase, 35.2 percent and $3,348.

Osceola, Dickinson and Lyon counties also saw 35.2 percent increases. The Northwest Crop Reporting District, which includes all four counties, reported the highest land values at $12,890, an increase of $3,241, or 33.6 percent, from 2011.

"This survey covers one of the most remarkable years in Iowa land value history," said Duffy. "This is the highest state value recorded by the survey, and the first time county averages have reached levels over $10,000. While this is an interesting time, there is considerable uncertainty surrounding future land values."

Farmland values are highly correlated with farm income, and as income increases, so will land values, Duffy said. In 2005, corn prices averaged $1.94 per bushel. The preliminary estimated price for November 2012 is $6.80. Soybean prices changed from $5.54 to $13.70 over the same period. Coming into 2012 there was a general sentiment that prices would decline from their peaks.

"But, the drought changed this and the prices remained at high levels," Duffy said. "How long the high prices will last is unknown."

Duffy said the increase in income has been the primary cause higher values, but not the only one.

"Interest rates are at the lowest level in recent memory," Duffy said.

Farmland purchased by investors went from 18 percent in 1989 to 39 percent in 2005, but investor purchases are back to the 1989 level of 18 percent, Duffy said.

Low–grade land in the state averaged $5,119 per acre and showed a 20.2 percent increase, while medium grade land averaged $7,773. High grade land averaged $10,181. The lowest land value was estimated in the South Central Crop Reporting District, $4,308.

The increase is higher than results of other recent farmland value surveys. The Chicago Federal Reserve Bank estimated an 18 percent increase in Iowa land values from October 2011 to October 2012, and the Iowa Chapter of the Realtors Land Institute estimated a 7.7 percent increase from March to September 2012.

"This could be due to values increasing more rapidly in the past few months than earlier in the year, Duffy said. "Better than expected crop yields and the level of land sale activity due to the proposed changes in land-related taxes contributed to the increasing values."