Recently released opinion surveys of farm real estate trends show key Midwest land values stuck in neutral or sliding below 2014 levels. But bankers, farmers and real estate appraisers may be overreacting in areas where crops look great.
Actual Iowa land sales in four dozen counties tracked by Peak Soils Index show good-quality farmland surging about $500 per acre since May and bouncing past year-ago levels. The index pegs Iowa farmland with a Corn Suitability Rating of 60 worth $8,284 per acre, based on a 30-day moving average of actual sales recorded in county courthouses. That’s up from a low of $7,690 at the end of April. A year ago, the same index found Iowa farmland worth $8,043 per acre.
Last week the Chicago Federal Reserve reported good-quality Iowa farmland values had tumbled 7% below July 2014 levels, based on its own opinion survey of lenders, farm realtors and appraisers. The Fed blamed lower values on the fact that corn prices were averaging $3.65 per bushel in the second quarter of 2015, 21% below a year ago and 48% below two years ago. Soybean prices at $9.63 were down 33% and 35% respectively.
A Farm Credit Services of America benchmark study of farmland trends in its five-state area reported Iowa land values down more than 10% on July 1, compared to values a year earlier. It includes “benchmark” farms with FCS America appraisers adjusting values based on local conditions
In contrast, “We’ve seen a good uptick in Iowa prices since the end-of-May numbers,” said Paul Kanitra, Peak Soil president and founder. “It clearly looks like Iowa values have found support. Being $500-plus off our lows, we have found enough demand for a meaningful rally.”
The story in the Eastern Corn Belt may be just the opposite, reports Howard Halderman, president of Halderman Real Estate Services and Farm Management, Wabash, Indiana. Auction results have been so tepid his firm is postponing sales until after harvest, if possible.
June and July deluges mean “many operators don’t know their yields, their crop insurance claims or their farm program payments yet. Ag lenders are telling their clients not to spend money until they know where they stand this fall,” Halderman adds. “There are just too many unknowns.”
He estimates Indiana land values are off 5% to 10% from year-ago levels, with lower-quality land taking a bigger hit.
According to the Peak Soil Index, Iowa land values peaked in May 2013 at $9,154, about 10% above today’s market. Find weekly updates of the Peak Soil Iowa Index on DTN’s Farm Finance page, under Farm Business.
Peak Soil will be adding land indexes for Indiana, Minnesota and Wisconsin later this year.