Iowa County farmland reaches $6,400 threshhold
(YourWeeklyPaper) Iowa County farmland values are keeping in step with the recent bullish trend across the state.
The price of an acre of farmland in the county jumped by a whopping 29 percent during the past year to $6,428, according to figures released by Iowa State University Extension last week. That’s just below the $6,708 per acre price estimate, per the results of ISU’s Iowa Land Value Survey conducted in November.
“Well, it’s pretty incredible,” observed Tom Sandersfeld, realtor with Sandersfeld Iowa Realty and Auctions, Marengo. “I didn’t think (prices) were up that much. They’re pretty incredible numbers.
Fred Stiefel, a Victor attorney and insurance salesman who represents land sellers and buyers, said he’s not surprised by the recent surge. “Historically, land has always been a good investment,” he said. “It’s the most valuable commodity there is.”
He cited four reasons for the recent surge:
• Corn and soybean prices have been high in recent years, making it profitable to own land. Sandersfeld – who said that some farmers are locking in their prices a couple of years in advance – agreed, noting that he is aware of reports stating that about 40 percent of the corn crop is being used for ethanol production.
• The principles of supply (a limited amount of land) and demand (not many sellers).
• Interest rates have been low. “If you put money into a savings account, you’re getting very low interest. Rather, some people have been investing in land, where there’s a better rate of return,” said Stiefel.
• The stock market, which sees some swings, is up. Sandersfeld added that he believes more farmers, and not investors or speculators, are buying land.
“The commodity prices, they’ve been running … well, they’re not $7 today but some farmers are being able to lock in prices a year or two out. If they did, it’s more money in pockets – land, equipment those kind of thing, big driving force.”
Iowa County’s neighbors have posted similar increases, with Benton ($7,681), Johnson ($7,540) and Linn ($7,672) all topping above $7,000. Poweshiek County’s estimate was $6,442, just above Iowa County’s figure, while Keokuk County came in at $5,514.
The statewide average represented a 32.5 percent jump from 2010, according to the survey, and matches results of other recent surveys of Iowa farmland value – the Chicago Federal Reserve Bank’s estimated 31 percent increase in Iowa land values and the Iowa Chapter of the Realtors Land Institute’s 12.9 percent increase estimated for six months of 2011.
The 2011 values are historical peaks. Mike Duffy, Iowa State University economics professor and extension farm management economist who conducts the survey, said this year’s land value survey covers one of the most remarkable years in Iowa land value history. Several land sales made headlines when buyers were starting to pay five-digit figures – first $10,000, then $15,000 and $20,000 per acre – for farmland.
Stiefel said he is aware of an instance near Williamsburg earlier this year where a piece of farmland went for $10,000 per acre. He did not have more exact details.
Historically, Scott County has held the highest-priced farmland, and this year it had a $9,223 per acre average. But at $9,512, O’Brien County in northwestern Iowa took the title of having the highest average county values in the survey.
The Northwest Crop Reporting District reported the highest land values at $8,338, an increase of $1,983 (31.2 percent) from 2010. Scott County still had the highest percentage increase (37.7 percent) and highest increase in value (up $2,524 from last year).
Duffy said this year’s increase is the highest percentage increase recorded by the survey, which dates to the 1940s.
When adjusted for inflation, the average land value of $6,708 per acre at an all-time high. The previous inflation-adjusted high was set in 1979.
“This rate of increase in 2011 has led to concerns that farmland may be the next speculative bubble,” said Duffy. “Some people feel farmers are setting themselves up for a fall similar to the 1980s. Without a doubt, it’s an interesting time and something to watch, but it isn’t a time to panic.”
Stiefel said it is impossible to predict whether prices are nearing a peak, although he admits he never would have dreamed that land could sell for $20,000 an acre.
“You hardly think it could go higher, but as soon as you say that you have something new,” he said. Sandersfeld believes the $20,000-per-acre land sale was an anomaly, and that it was simply two bidders who were determined to buy the same piece of land. At one time there were 60 sales in state where land went for more than $10,000, but he believes those sales don’t quite tell the whole story.
“When you’ve got people willing to pay in Iowa County $7,000-9,000 an acre, that’s pretty amazing,” he said.
WHY THE INCREASE?
Duffy said that examining some of the causes for the current increase in farmland values and the reactions is helpful in assessing the situation.
Farmland values are highly correlated with gross farm income. As gross farm income increases, so will land values. In 2005, corn prices averaged $1.94 per bushel in Iowa. The preliminary estimated price for November 2011 is $6.05. Soybean prices changed from $5.54 to $11.40 over the same period.
There has been considerable variation in commodity prices over the past few years, but net farm income has increased substantially and is projected to increase even more for 2011. The Iowa State economist goes on to say, this increase in income has been the primary cause for the increase in farmland values, but not the only one.
“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 decreased this year to 22 percent.”
Duffy pointed out another factor that should be considered, the relatively dismal performance of the stock market – people want to buy farmland or are not selling it because they don’t know where else to put their money.
The increase in farm income, the changes in investor demand and the changes in investment alternatives have all led to a volatile market. One area where the volatility is revealed is in the number of sales. Land value survey respondents have shown considerable variation over the past few years when queried about the number of sales.
Sales decreased considerably in 2009. They improved somewhat in 2010 and based on the results reported in 2011, most people are seeing more sales or at least similar sales in 2011 relative to 2010. One of the differences is in the use of auctions; respondents noted what appears to be a rapid increase in the use of this method of sale.
Preliminary analysis of 2011 sales data shows an increase in price by using an auction. As one respondent said, economics may get the person to the auction but emotion often leads to the purchase. Duffy believes farmland values should remain strong for the next several months at least. Beyond that there is a fair degree of uncertainty with respect to whether land values can maintain their current levels.
The economist said there are several key components to watch:
• The amount of debt incurred with land acquisition.
• Government policies – especially policies related to energy.
• What happens to input costs – land being the residual claimant to any excess profits in agriculture.
• The performance of the overall economy, especially with respect to income. • Government monetary policies as they relate to inflation and interest rates.
• The performance of the U.S. economy and economies throughout the world – which impact commodity prices, which in turn impact land values.
• Weather related problems – both here and around the world.
OVERVIEW
While the highest county land values were reported in O’Brien County, Decatur County had the distinction for the second year in a row as having the lowest reported land value, $2,721 per acre, and the lowest dollar increase, $636.
Washington County had the lowest percentage increase, 28.2 percent, with a reported $7,166 average value.
Low-grade land in the state averaged $4,257 per acre and showed a 26.8 percent increase or $900 per acre, while medium grade land averaged $6,256 per acre; high-grade land averaged $8,198 per acre.
The lowest land value and smallest percentage increase were estimated in the south central crop reporting district, $3,407 and 26.7 percent respectively. The southwest crop reporting district reported a 36.5 percent increase, the highest district percentage reported.
http://yourweeklypaper.com
The price of an acre of farmland in the county jumped by a whopping 29 percent during the past year to $6,428, according to figures released by Iowa State University Extension last week. That’s just below the $6,708 per acre price estimate, per the results of ISU’s Iowa Land Value Survey conducted in November.
“Well, it’s pretty incredible,” observed Tom Sandersfeld, realtor with Sandersfeld Iowa Realty and Auctions, Marengo. “I didn’t think (prices) were up that much. They’re pretty incredible numbers.
Fred Stiefel, a Victor attorney and insurance salesman who represents land sellers and buyers, said he’s not surprised by the recent surge. “Historically, land has always been a good investment,” he said. “It’s the most valuable commodity there is.”
He cited four reasons for the recent surge:
• Corn and soybean prices have been high in recent years, making it profitable to own land. Sandersfeld – who said that some farmers are locking in their prices a couple of years in advance – agreed, noting that he is aware of reports stating that about 40 percent of the corn crop is being used for ethanol production.
• The principles of supply (a limited amount of land) and demand (not many sellers).
• Interest rates have been low. “If you put money into a savings account, you’re getting very low interest. Rather, some people have been investing in land, where there’s a better rate of return,” said Stiefel.
• The stock market, which sees some swings, is up. Sandersfeld added that he believes more farmers, and not investors or speculators, are buying land.
“The commodity prices, they’ve been running … well, they’re not $7 today but some farmers are being able to lock in prices a year or two out. If they did, it’s more money in pockets – land, equipment those kind of thing, big driving force.”
Iowa County’s neighbors have posted similar increases, with Benton ($7,681), Johnson ($7,540) and Linn ($7,672) all topping above $7,000. Poweshiek County’s estimate was $6,442, just above Iowa County’s figure, while Keokuk County came in at $5,514.
The statewide average represented a 32.5 percent jump from 2010, according to the survey, and matches results of other recent surveys of Iowa farmland value – the Chicago Federal Reserve Bank’s estimated 31 percent increase in Iowa land values and the Iowa Chapter of the Realtors Land Institute’s 12.9 percent increase estimated for six months of 2011.
The 2011 values are historical peaks. Mike Duffy, Iowa State University economics professor and extension farm management economist who conducts the survey, said this year’s land value survey covers one of the most remarkable years in Iowa land value history. Several land sales made headlines when buyers were starting to pay five-digit figures – first $10,000, then $15,000 and $20,000 per acre – for farmland.
Stiefel said he is aware of an instance near Williamsburg earlier this year where a piece of farmland went for $10,000 per acre. He did not have more exact details.
Historically, Scott County has held the highest-priced farmland, and this year it had a $9,223 per acre average. But at $9,512, O’Brien County in northwestern Iowa took the title of having the highest average county values in the survey.
The Northwest Crop Reporting District reported the highest land values at $8,338, an increase of $1,983 (31.2 percent) from 2010. Scott County still had the highest percentage increase (37.7 percent) and highest increase in value (up $2,524 from last year).
Duffy said this year’s increase is the highest percentage increase recorded by the survey, which dates to the 1940s.
When adjusted for inflation, the average land value of $6,708 per acre at an all-time high. The previous inflation-adjusted high was set in 1979.
“This rate of increase in 2011 has led to concerns that farmland may be the next speculative bubble,” said Duffy. “Some people feel farmers are setting themselves up for a fall similar to the 1980s. Without a doubt, it’s an interesting time and something to watch, but it isn’t a time to panic.”
Stiefel said it is impossible to predict whether prices are nearing a peak, although he admits he never would have dreamed that land could sell for $20,000 an acre.
“You hardly think it could go higher, but as soon as you say that you have something new,” he said. Sandersfeld believes the $20,000-per-acre land sale was an anomaly, and that it was simply two bidders who were determined to buy the same piece of land. At one time there were 60 sales in state where land went for more than $10,000, but he believes those sales don’t quite tell the whole story.
“When you’ve got people willing to pay in Iowa County $7,000-9,000 an acre, that’s pretty amazing,” he said.
WHY THE INCREASE?
Duffy said that examining some of the causes for the current increase in farmland values and the reactions is helpful in assessing the situation.
Farmland values are highly correlated with gross farm income. As gross farm income increases, so will land values. In 2005, corn prices averaged $1.94 per bushel in Iowa. The preliminary estimated price for November 2011 is $6.05. Soybean prices changed from $5.54 to $11.40 over the same period.
There has been considerable variation in commodity prices over the past few years, but net farm income has increased substantially and is projected to increase even more for 2011. The Iowa State economist goes on to say, this increase in income has been the primary cause for the increase in farmland values, but not the only one.
“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 decreased this year to 22 percent.”
Duffy pointed out another factor that should be considered, the relatively dismal performance of the stock market – people want to buy farmland or are not selling it because they don’t know where else to put their money.
The increase in farm income, the changes in investor demand and the changes in investment alternatives have all led to a volatile market. One area where the volatility is revealed is in the number of sales. Land value survey respondents have shown considerable variation over the past few years when queried about the number of sales.
Sales decreased considerably in 2009. They improved somewhat in 2010 and based on the results reported in 2011, most people are seeing more sales or at least similar sales in 2011 relative to 2010. One of the differences is in the use of auctions; respondents noted what appears to be a rapid increase in the use of this method of sale.
Preliminary analysis of 2011 sales data shows an increase in price by using an auction. As one respondent said, economics may get the person to the auction but emotion often leads to the purchase. Duffy believes farmland values should remain strong for the next several months at least. Beyond that there is a fair degree of uncertainty with respect to whether land values can maintain their current levels.
The economist said there are several key components to watch:
• The amount of debt incurred with land acquisition.
• Government policies – especially policies related to energy.
• What happens to input costs – land being the residual claimant to any excess profits in agriculture.
• The performance of the overall economy, especially with respect to income. • Government monetary policies as they relate to inflation and interest rates.
• The performance of the U.S. economy and economies throughout the world – which impact commodity prices, which in turn impact land values.
• Weather related problems – both here and around the world.
OVERVIEW
While the highest county land values were reported in O’Brien County, Decatur County had the distinction for the second year in a row as having the lowest reported land value, $2,721 per acre, and the lowest dollar increase, $636.
Washington County had the lowest percentage increase, 28.2 percent, with a reported $7,166 average value.
Low-grade land in the state averaged $4,257 per acre and showed a 26.8 percent increase or $900 per acre, while medium grade land averaged $6,256 per acre; high-grade land averaged $8,198 per acre.
The lowest land value and smallest percentage increase were estimated in the south central crop reporting district, $3,407 and 26.7 percent respectively. The southwest crop reporting district reported a 36.5 percent increase, the highest district percentage reported.
http://yourweeklypaper.com
Posted by Colvin & Co. at 12/28/2011 5:30 AM 
Categories: Farmland
Tags: agriculture farmland corn commodities farming Iowa Land Value
Categories: Farmland
Tags: agriculture farmland corn commodities farming Iowa Land Value
I like Fred Stiefel's comment: “Historically, land has always been a good investment,” he said. “It’s the most valuable commodity there is.”
Reply to this