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Iowa farmland value hit a record high, even when adjusted for inflation

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Dean Borg
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IPR file
Iowa State University economist Wendong Zhang said some of the things that have driven the land market up are higher commodity prices, limited land supply and low interest rates until last summer.

Iowa farmland values jumped to record levels over the last year, according to an annual land values survey done by Iowa State University.

The 2022 Iowa State University Land Value Survey found the average price of an acre of Iowa farmland was $11,411 per acre from November 2021 to November 2022, a 17% growth from the year before. The opinion survey gets responses from licensed real estate brokers, farm managers, appraisers, agricultural lenders and others knowledgeable about the farmland market.

ISU extension economist Wendong Zhang, who leads the survey, said the growth in land values over the last year is “phenomenal.” Last year, his survey found that Iowa land values had skyrocketed 29% from November 2020 to November 2021.

“This is a ramp-up that we haven’t seen since the 1980s, essentially,” Zhang said during a news conference Tuesday where he unveiled the survey’s results.

The 17% growth to more than $11,000 per acre is the nominal land value. Zhang said even when adjusting the survey results to account for inflation, they surpass the previous peak set in 2013, which means that both the nominal and inflation-adjusted value have hit record highs since ISU started collecting data for the survey in the 1940s.

Zhang said the land market has been driven up by a variety of factors: higher commodity prices, stronger yields, a limited supply of land, a good farm economy, low interest rates until summer 2022, strong demand, cash on hand and high credit availability.

“We’re seeing tremendous growth in income and also historically low interest rates that led to a dramatic increase in commodity prices, and also farmland prices as well,” Zhang said. “Those higher prices encouraged more expansion of agricultural production in the United States.”

The Federal Reserve has been raising interest rates to curb inflation, and is expected to raise interest rates again, Zhang said. He said hits to the land market won’t be felt until later in 2023 or 2024.

“It takes almost a decade for the land market to fully absorb the shocks,” Zhang said.

This year’s survey included a new question, on respondents' perception of current land values. The survey found 24% of the respondents believe land values are just right, 2% think the land values are too low and 3% think the values are way too low. Meanwhile, 59% of the respondents think current land values are too high and 12% thought land values are way too high.

“There are more growing concerns about the sustainability of the land market growth,” Zhang said, “and also the elevated entry barriers for beginning farmers and less resources to farmers to enter the market because of the higher prices.”

Katie Peikes is IPR's agriculture reporter