The worst U.S. drought in more than 50 years could not cool off Iowa farmland prices, which drove to record highs for the third straight year in 2012 on strong demand from cash-rich farmers. Iowa farmland prices averaged $8,296/acre, an increase of 23.7% from $6,078 in 2011, according to the annual Iowa Land Value survey compiled by Iowa State University (ISU). This year will also mark the third straight year that Iowa farmland values have risen more than 15%.
The survey, comprised of 486 real estate brokers and other market participants also showed that existing farmers accounted for 78% of Iowa farmland purchases in the last year, while new farmers accounted for 3%.
The percentage of Iowa farmland purchases made by investors declined for the third year. After soaring from 18% in 1989 to as high as 39% in 2005, that percentage has now returned to the 1989 level of 18%.
The increase in farmland value shown by the ISU survey is somewhat higher than results of other recent surveys. “The difference in survey estimates could be due to values increasing more rapidly in the past few months than earlier in the year. 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,” said ISU economics professor and extension farm management economist Mike Duffy, who conducts the survey.
The primary driver of the continued surge in farmland values has been strong farm income, Duffy said in an ISU Extension news release, noting that while there has been considerable variation in commodity prices over the past few years, farm income has increased substantially. Continued low interest rates have also contributed to the farmland value surge, he said.
Source: Corn & Soybean Digest