Four out of five local Iowa counties experienced rising farmland values during the past year.
A recently released, annual report from Iowa State University indicates that favorable interest rates and government payments helped boost land values across the state during a year in which Iowa’s agriculture industry dealt with challenges ranging from the destructive derecho to trade uncertainties.
The report by Wendong Zhang, an assistant professor in economics and extension economist at Iowa State, showed the statewide average value per acre rising from $7,432 in 2019 to $7,559 in 2020.
“It goes again to prove (farmland) is a limited resource and a valuable investment,” said Matt Heitz, a farmer in the Farley area.
Dubuque County’s average farmland value rose from $7,607 per acre in 2019 to $7,678 in 2020, according to the Iowa State report.
Heitz said farmland values can help support a farmer’s balance sheet.
“Not so much when it goes up, but when it goes down, on paper at least, it can look like a farmer is in a very bad position,” he said.
Heitz said rising farmland values don’t often help farmers secure loans.
Land values also rose in Delaware County, up 1.8%; Jackson County, up 4.9%; and Jones County, up 3.7%. Clayton County values dipped slightly, from $6,548 in 2019 to $6,532 in 2020.
Jackson County Economic Alliance Director Nicolas Hockenberry said the rising land value is good news for local residents.
“Long-term growth of ag land value helps build wealth for residents of Jackson County, as much of our county’s ag land remains family-owned,” he said.
That added wealth “can have major impacts on our local economies,” Hockenberry said.
Larry Tranel, an Iowa State University Extension and Outreach economist based in Dubuque, said rising farmland values can give local farmers more borrowing capacity, but it can pose challenges, too.
“It makes it more difficult for younger farmers to get started,” he said.
Tranel said farmland values can serve as indicators of local land markets rather than local agricultural economies.
“So much outside investment comes into the land market,” he said, noting that investors see land as a safe-haven investment. “It would be surprising to learn how much of the agricultural land is owned, not by the farmers but by investors.”
In his report, Zhang stated that the land market initially decreased with the onset of the coronavirus pandemic, which lowered food demand.
“The rebound in recent months is due to strong government payments, interest rate cuts, limited land supply and recent commodity price rallies,” Zhang stated.
U.S. corn and soybean prices peaked in mid-November and remain higher than at the beginning of the year, despite some recent decline.