By Courtney Churchill, Appraisal Intern
The results of the 2021 Iowa State University Land Value Survey were presented on December 14th, 2021, by Dr. Wendong Zhang. This is the only study since 1950 that reports a county-level land value estimate for all 99 counties in Iowa. This study was designed as an Expert Opinion Survey with Respondents being Agricultural Professionals. These professionals include Farm Managers (13%), Appraisers (10%), Ag Lender (39%), Broker / Realtor (14%), Farmer / Landowner (9%), Government (11%), Other (3%). Northern Iowa had more responses than other areas of the state with 232 out of the 645 responses.
According to Dr. Zhang, when comparing data across surveys, the percent change in land values is more important than the change in dollars of land value. Keeping that in mind, as of November 2021, the average cost for all categories of land quality was estimated to be $9,751 per acre, or an increase of $2,193 per acre, the present increase being 29% (inflation adjusted value of + 21%). High Quality Land is at $11,834 as of November 2021, this is up 30.5% or $2,766/acre. Medium Quality Land is at $9,071 as of November 2021, this is up 27.4 % or $1,954/acre. Low Quality Land is at $6,397 as of November 2021, this is up 26% or $1,319/acre.
Seeing that land values have previously been stagnant in the last three years; it is surprising to witness the substantial change in these values during the period of November 2020 to November 2021. Some of the driving factors of these changes are higher commodity prices, favorable interest rates, strong yields, land availability, strong demand + investor demands, government payments, good farm economy / return to land. To further speak on commodity prices, the state average predictions for 2021 Cash Crop Prices for corn in one year are $5.09 per bushel, and $5.11 per bushel in 5 years. For soy the prediction in one year is $11.55 per bushel, and $11.72 per bushel in 5 years. Lastly, it is important to note the direct relationship between commodity price and farmland; With high priced commodities, as well as high demand for commodities, this creates the prime driving forces of land values we are seeing now.
With all this upswing, should we be worried about inflation on land values or other negative factors in the next year? According to Dr. Zhang, the answer lies somewhere in the middle. The Federal Reserve believes that temperamental elements are what is driving inflation. These elements should hopefully fall 2-3% in the next quarter. However, the Federal Reserve is keeping a close eye on it and interest could trend upward if inflation continues to run high. This is important because Farmland Value is extremely sensitive to moving interest rates, and an increase in interest rates will put downward pressure on farmland value.
As for 2022, the good news is even though future changes in inflation, interest rates and commodity prices could alternate how the farmland market is currently moving, under the current conditions most professionals are expecting a stable year with mostly rising values in farmland.
Below is the link to the CARD cite page where you can find more information on Dr. Zhang’s study, as well as the video news conference with PDF(s) for the study and its maps.
Zhang, W. 2021. “2021 Iowa State University Land Value Survey:
Overview.” CARD working paper 21-WP 629, Iowa State University Extension and Outreach,
Center for Agricultural and Rural Development.