Iowa's average farmland values fell 3.1% this year after climbing to record highs over the past five years, a newly released Iowa State University survey shows.
Amid an agricultural downturn, farmland values are expected to fall again next year, although the five-year outlook is more positive, ISU's survey of 330 agricultural professionals shows.
This year's Iowa farmland average value sank $369 over last year's to $11,467 an acre, pulled lower by falling corn and soybean prices, higher interest rates and elevated costs to raise crops, Rabail Chandio, an ISU economist, said Tuesday in an online presentation of the annual survey results.
Values had climbed steadily since 2018, reaching a record high of $11,835 an acre in 2023. But after farm profits peaked in 2022, they fell 19% last year, and they're forecast to drop another 6.3% this year, U.S. Department of Agriculture data shows.
"We saw land values rise for five straight years, including surges of 29% (in 2021) and 17% (in 2022), which naturally leads to a reset or balancing in the market," said Chandio, who leads the survey. "If we look back to the previous peak in 2013, the market 'adjusted' with relatively small declines spread over a few years."
Nearly 60% of those responding to the survey expect farmland values will drop again next year, although most expect a decline of less than 5%.
And despite the near-term pessimism, 80% expect values will climb again over five years, with 36% expecting 10% to 20% gains.
"This long-term confidence aligns with expectations of more stable or slightly rising corn and soybean prices, suggesting that while the short-term outlook may be challenging, the market's foundation remains strong," Chandio said.
O'Brien County tops value list in Iowa. Which county is lowest?
Seventy-five of Iowa's 99 counties saw average values decline, Chandio said.
For example, in central Iowa, Polk County values fell 2.6% to $12,347 per acre; Story, 1.6% to $13,770; and Dallas, 3.3% to $12,002. In eastern Iowa, Johnson County's values dropped 0.2% to $13,112 an acre.
Statewide, O'Brien County average land values led at $15,921 an acre, although values there decreased 2.4% since last year. Appanoose County reported the lowest value at $6,840 an acre, despite climbing 7.7% this year.
Chandio said limited land supply, strong yields and the availability of cash and credit to buy land have helped support land values.
Falling interest rates could help decide which way the farmland market moves, Chandio said.
"Although rates recently dropped, with another cut on the horizon, it's not enough yet to ease the pressure from those earlier hikes as we move into 2025," she said.
She said a rebound in farmland values depends on how long it takes for rates to experience any marked decline. "If rates fall within a couple of years, we could see farmland values beginning to recover sooner," she said. "But if rate cuts take longer, we may see declines persist for another year or two."
Other surveys have shown a decline this year, as well, including a Realtors Land Institute-Iowa Chapter report in September that found an 8.1% decline over September 2023.
Based on 35 years of data, about 70% of farmland purchases are made by existing farmers, Chandio said. That's possibly because 84% of all Iowa farmland is owned debt free.