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ISU Survey: Iowa Farmland Values Reach Historic Highs

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AMES, Iowa - The value of an average acre of good Iowa farmland soared almost 24 percent from 2011 to $8,296, according to the Iowa State University's annual Iowa Land Value Survey conducted in November.

It marked the third year in a row that farmland values have increased more than 15 percent.

The increase is higher than results of other recent Iowa farmland value surveys. The Chicago Federal Reserve Bank estimated that Iowa land values rose 18 percent from October 2011 to October 2012 and the Iowa Chapter of the Realtors Land Institute survey recorded a 7.7 percent increase from March to September 2012.

The average value of a good acre of Linn County farmland rose to $9,189 in November from $7,672 in November 2011. In Johnson County, the value of an average acre of good farmland edged up to $8,774 in November from $7,540 in the same month last year.

Mike Duffy, ISU economic professor and extension farm management economist who conducts the survey, said the results of the latest Iowa Land Survey are historic. Duffy said farmland values in northwestern Iowa topped $12,000 per acre, with O'Brian County recording an average $12,862 an acre.

"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," Duffy said. "The Iowa State survey samples different populations, and uses different wording than the other surveys. This could also lead to different results especially in times of uncertainty.

"Even within the Iowa State survey there was considerable variation in the estimates."

Duffy said understanding some of the causes for the current increase in farmland values is helpful in determining why values soared. He said farmland values are highly correlated with farm income. As farm income increases, so will land values.

In 2005, corn prices averaged $1.94 per bushel in Iowa. The preliminary estimated price for November 2012 is $6.80.

Soybean prices changed from $5.54 to $13.70 over the same period. Coming into 2012 there was a general sentiment that prices would decline from their peaks. But, the drought kept that from happening and the commodity prices remained at high levels.

"There are other causes for the increase," Duffy said. "Interest rates are at the lowest level in recent memory. Farmland purchased by investors went from 18 percent in 1989 to 39 percent of purchases in 2005, but investor purchases are back to the 1989 level of 18 percent this year after decreasing for the third year in a row."

Iowa farmers also have very little debt compared with the early 1980s. Duffy has stated publicly that 70 percent of Iowa farmland is owned debt-free.

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