Iowa State University economist Michael Duffy reports that average farmland prices dipped 2% over the course of 2009, the first decline since 1999. The primary culprit for the decrease was a drop in corn, soybean and livestock prices, according to Duffy. The average value of an acre of Iowa farmland decreased to $4,371 during 2009 from $4,468 in 2008.
During the near-decade of land value increases, the average value of an acre of farmland rose 145 percent. (See chart from the Des Moines Register below.)
Although the average price of farmland did decrease during 2009, not all areas of the state were so affected. Northwest Iowa, northeast Iowa, and some counties in east and southeast Iowa saw slight increases in values. Allamakee County in the very northeastern corner of the state registered the greatest jump in value, up 5.7% over 2008.
Overall average land values on a county-by-county basis ranged from a low of $1,957 per acre in southern Iowa's Decatur county to a high of $6,153 in northwest Iowa's O'Brien county.
There is close to a consensus that values have stabilized and may be trending higher again. Most of the decline is attributable to events early in 2009, and prices seem to have resumed a slow upward march in the last half of the year.
According to the Duffy's survey results, which were the basis for these conclusions on land values, 72 percent of land sales in 2009 were to existing farmers, primarily neighbors. Twenty-three percent of sales were to investors, and four percent were to new farmers. Duffy also mentioned that the investor category of buyers consisted primarily of Iowans "who are familiar with farming and want to add to their holdings. There isn't too much evidence of three-piece-suit, Wall Street types among farmland investors," he said.
(As an ironic aside, we received a phone call from a gentleman calling from the heart of Manhattan last week who asked us about investing in farmland. We have since determined that the call was bonafide, although it is unknown at this time whether the caller will actually end up an owner of Iowa farmland.)
Our conclusions about this report? We think we'll go along with what Randy Hertz of Hertz Farm Management said. "Farmland is still the best investment you can make." It's hard to argue with him on that.
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Copyright © 2009 By Ken Tharp, All Rights Reserved. * Iowa Land Prices Decline; First Time in Nine Years * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.