Iowa Farmland Hits New Peak in 2023, Pace Slowed
Article from Winter 2024 Hertz Outlook Newsletter
After steep double-digit increases in Iowa land values in 2021 and 2022, the 3.7% increase in farmland values in 2023 seems modest. Yet the average statewide value of $11,835 per acre is the highest since Iowa State University began its survey in 1941.
ISU’s survey of bankers, real estate professionals, appraisers, professional farmland managers and others reported a statewide average for high quality land at $14,296 per acre, up 3.5% for the year. On medium quality Iowa cropland, the state average was $11,075, up 3.8%, and low-quality land was pegged at $7,664, up 4% compared to December 2022.
By region, the northwest corner of the state posted the highest average land value of $14,753 per acre, but that was actually down $125 compared to 2022. Rabail Chandio, the ISU ag economist who conducted the annual survey explained that the decline was small enough to be within the survey’s margin of error.
More than 70% of the farmland buyers in 2023 across the state were farmers. “When we're seeing sales valued at $26,000 or $30,000 per acre, those are not going to investors because they're not getting a return. They're most likely the long-term farmer that's buying land because it's that specific parcel," Chandio explained.
USDA predicts farm income to fall 17.4% in 2023 compared to a record high in 2022, although the income forecast is not as severe as the 23% decline USDA had forecasted in August. And after four years of increasing farm income, farmers have strong cash reserves. So, even with an expected drop in farm income, farmers’ incomes remain more than 30% above farm income levels in 2020, Chandio explained.
"Interest rates will continue to be a negative factor in the land markets -- even if they stop increasing them or they decrease a little bit -- because the hikes we have seen have not been fully absorbed yet," Chandio said.
On the other hand, a limited supply of farmland for sale is supporting land values, according to the survey. The majority of sellers (57%) were estates, with retired farmers accounting for 23%.
“While positive influences (to land values) were more prominent at the beginning of the year (2023), negative pressures are building as we approach 2024,” Chandio said. She thinks the land market is likely entering into a period similar to the post-ethanol boom, where prices slowly declined or stayed flat.
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