A news release Tuesday from the Center for Agricultural and Rural Development at Iowa State University and Iowa State University Extension and Outreach indicated that, “Favorable interest rates, a strong demand for land, and substantial government payments helped stabilize Iowa’s farmland market in a year in which Iowa’s farmers faced the destructive onslaught of a derecho, significant uncertainties in US agricultural trade, and a pandemic that significantly altered market demand.”
The release noted that, “This year’s survey found that the average statewide value of an acre of farmland is $7,559, an increase of 1.7%, or $127, since 2019. The $7,559 per acre estimate, and 1.7% increase in value, represents a statewide average of low-, medium-, and high-quality farmland.”
Tuesday’s update added that, “Statewide, Iowa’s high-quality farmland saw a decline in value of 0.1%. However, [Dr. Wendong Zhang, an assistant professor of economics at Iowa State University] said that it’s important to note that number is more indicative of a flat market, rather than a decline, and that several factors have led to a recent rebound in the market.
“‘The rebound in recent months is due to strong government payments, interest rate cuts, limited land supply, and recent commodity price rallies,’ he said.”
“‘There is definitely concerns and downside risks about the price rallies because post- harvest prices are typically lower,’ he said. However, he stressed that China is still at least 10%–15% short of its regular hog inventory, so farmers should continue seeing increased feed grain demand.
“Additionally, Germany, a key competitor for US pork exports, is now battling with African swine fever, the same disease that decimated China’s hog industry, which could increase US pork exports in the future.
Zhang also said that farm payments in 2020 helped prop up the farmland market ‘in a big way.’ According to the USDA’s Economic Research Service, farm payments will increase 107% in 2020, mostly due to supplemental and ad hoc disaster assistance for COVID-19 relief. They also project net farm income will increase 43.1% in 2020.
In a more detailed overview of the Survey, Dr. Zhang pointed out that, “The 2020 land value still represents a 13% decline from the 2013 peak in nominal land values, or a 22% drop in inflation-adjusted values.”
“In general, the results from the 2020 Iowa State University Land Value Survey echo results from other surveys, which all showed relatively stable farmland market trends.”
The analysis of the results also pointed out that, “The majority of farmland sales, 51%, were from estate sales, followed by retired farmers at 23%. Active farmers account for 16% of sales, while investors accounted for 9%.”