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ISU survey: Floyd, Mitchell counties lead state in farmland value increase

By Bob Steenson, bsteenson@charlescitypress.com

Average farmland value increased in Floyd County this year by the greatest margin of anywhere in the state, according to the latest land value survey by Iowa State University Extension and Outreach.

The report shows that Floyd and Mitchell counties increased in average farmland value by 3.1 percent from 2017 to 2018, the highest percentages listed.

According to the survey, the average price per acre in Floyd County increased from $7,512 per acre to $7,742. Mitchell County increased from $7,696 an acre on average to $7,931.

That’s in contrast to the state as a whole, however, where the average value per acre decreased 0.8 percent to $7,264.

The survey asks professionals such as appraisers, farm managers, ag lenders and real estate agents for their opinions on land values and also includes information from actual land sales. The 2018 study was conducted in November.

Dean Stewart, of Stewart Realty in Charles City, is one of the reporters who contributes to the survey. He said his experience echoes the conclusions drawn in the report.

“First and foremost, there’s been historically lower availability,” he said.

“For those farmers that are well managed with cash flow, when the right parcels do come up, even if they pay a bit of a premium to get it, with the scarce resource they’re willing to do it,” he said.

Stewart said that in a typical year there would be 50 to 60 or more farmland sales in the county.

“I don’t have the year-to-date number, but I’d be surprised if there were more than 35 or 40 this year,” he said. “Availability is a key component.

“You’ve got limited opportunities for expansion,” Stewart said. “When the right parcels do come along you just don’t hesitate. If it’s across the fence or the next mile over, it’s probably the one and only chance you’re going to get.”

Stewart said the fact that Floyd County bucked the trend of lower values statewide is a reflection of the economy in the area.

“Our last few years, production has been excellent overall,” he said. “While the margins for profitability have been tight, having more bushels in the bin has created opportunities for people to buy if you’re well-managed.

“I don’t think it’s happenstance that Floyd County or Mitchell County, with some strong other business and industry in the area, helps support that as well,” Stewart said.

Wendong Zhang, assistant professor of economics at Iowa State University, who led the study, said commodity prices were one of the biggest factors in the slight drop in average values statewide this year.

“Lower commodity prices, in part due to the recent trade disruptions, were cited as the most significant negative factor,” Zhang said.

Zhang noted that despite the state average downturns, farmers don’t need to worry about a sudden collapse of the US agricultural sector similar to the 1980s farm crisis.

“Limited land supply and strong demand by farmers still seems to hold up the land market,” he said. “For five consecutive years, survey respondents have reported fewer sales than the year before, and the ag economy is still robust with 82 percent of the land in Iowa fully paid for.”

Floyd and Mitchell counties may have had the greatest price increase, but they are still significantly below the highest per acre value in Iowa. That honor falls to Scott County along the Mississippi River, which increased 0.4 percent from $10,497 per acre to $10,537.

O’Brien and Sioux counties, in northwest Iowa, also had average land values above $10,000 an acre. O’Brien increased from $10,354 to $10,413, while Sioux County stayed about the same at $10,200 per acre.

The report shows that 29 out of Iowa’s 99 counties increased in average farmland value, while 70 counties stayed the same or decreased.

The lowest average values per acres are in the bottom two tiers of counties in central Iowa. Among them, Decatur and Lucas are the only two counties with average values below $4,000 an acre. The ISU survey puts those values at $3,488 for Decatur County and $3,810 for Lucas.

All of the lowest-average-value counties showed small increases from the previous year, however.

Zhang said that certain factors drive the variations in land value changes across counties and districts in Iowa.

“Put simply, land value equals farm income divided by interest rates. Local market competitiveness, local land availability and local income shocks tend to drive variations in land market changes across districts, counties and land quality classes,” Zhang said.

The most common positive factors influencing land prices noted by survey respondents were limited land supply, strong yields and low interest rates, according to information from Iowa State.

The most commonly cited negative influences were lower commodity prices, higher long-term interest rates and recent tariffs on U.S. soybeans, pork and other agricultural products.

The ISU land value survey was initiated in 1941, the first in the nation, and is sponsored annually by Iowa State University. The survey is typically conducted every November and the results are released in December.

Only the state average and the district averages are based directly on the ISU survey data. The county estimates are derived using a procedure that combines the ISU survey results with data from the US Census of Agriculture.

Floyd County historical average farmland price per acre, and change from previous year:

  • 2000 – $2,029
  • 2001 – $2,091; 3.1%
  • 2002 – $2,123; 1.5%
  • 2003 – $2,307; 8.7%
  • 2004 – $2,781; 20.5%
  • 2005 – $3,058; 10.0%
  • 2006 – $3,320; 8.6%
  • 2007 – $4,325; 30.3%
  • 2008 – $4,893; 13.1%
  • 2009 – $4,659; -4.8%
  • 2010 – $5,439; 16.7%
  • 2011 – $7,113; 30.8%
  • 2012 – $9,203; 29.4%
  • 2013 – $9,863; 7.2%
  • 2014 – $8,539; -13.4%
  • 2015 – $7,808; -8.6%
  • 2016 – $7,323; -6.2%
  • 2017 – $7,512; 2.6%
  • 2018 – $7,742; 3.1%

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