Farmland value continues to decline

Staff report
Not since the farm crisis of the 1980s has Iowa farmland declined in value for three straight years.

Until now.

Iowa State University last week released the results of its 2016 Land Value Survey conducted in November.

Farmland in Greene County is worth about $591 less an acre this year than it was last year, the university’s Center for Agricultural and Rural Development found, bringing the total estimated value of local land to $7,666 per acre.

That’s a loss of 7.16 percent since November 2015.

The good news is that land in Greene County is still more valuable per acre than the estimated state average of $7,183.

Across Iowa, values in 2016 took a 5.9 percent dive from 2015.

Researchers at ISU called the drop “historic.”

The last time land values declined for three consecutive years, John Mellencamp was still calling himself John “Cougar” Mellencamp, and together with Willie Nelson and Neil Young, they organized a little affair called Farm Aid.

Fortunately, we’re more likely to see Willie playing Wild Rose Casino.

The assistant ISU professor of economics who led this year’s survey called the decline modest, and said the “probability of a replay of the 1980s farm crisis is low.”

Thanks to the ethanol boom and historically low interest rates, average values are still 173 percent higher than they were in 2004.

Farmland values in Iowa hit a historic high in 2013 of $8,716 per acre, but have steadily declined since.

Land values have tumbled 17.5 percent since their peak in 2013.

According to Iowa State, results from this year’s survey are consistent with results by the Federal Reserve Bank of Chicago, the Realtors Land Institute and the U.S. Department of Agriculture.

In a news release, assistant professor of economics Wendong Zhang stated, “The golden era of phenomenal, yet abnormal growth in farm income and land values, as we saw from 2006 to 2013, is already behind us.

“The land market is going through an orderly adjustment while the U.S. agricultural sector, a competitive industry, is trying to adjust to the old normal of zero industry-wise net profits. For a pessimist, there are reasons to worry, especially for landowners and/or producers who are over-leveraged. For an optimist, this decline is still modest, and the probability of a replay of the 1980s farm crisis is low.”

Zhang said the likelihood of another farm crisis is low due to steady farm income accumulation before the downturn, a stronger government safety net and an overall lower debt level in the ag sector.

The decline didn’t come as a surprise.

In November 2015, more than 75 percent of Land Value Survey respondents thought values in their territory would continue to decline in 2016. The majority predicted the decline would be either less than 5 percent or between 5 and 10 percent.

Greene County’s six neighboring counties all weathered declines of at least 6.5 percent between 2015 and 2016.

Farmland in Webster County declined 6.54 percent to $8,265 per acre; Calhoun County experienced a drop of 6.76 percent to $8,655 per acre; Carroll County farmland is now valued at $8,342 per acre after a 6.78 percent decline; Dallas County farmland values dipped 7.04 percent to $7,577 per acre; Boone County took a hit of 7.18 percent to $8,168 per acre; and values in Guthrie County suffered a drop of 7.71 percent to $6,773 per acre.

Elsewhere in the state, Scott and Decatur counties reported the highest and lowest farmland values, respectively, for a fourth year.

Decatur County, in southern Iowa, reported a value per acre of $3,443, a loss of about 2 percent from last year’s report.

Scott County, in eastern Iowa, reported a value of $10,335 — a decrease of about 5.3 percent.

Plymouth and Sioux counties, in northwest Iowa, reported the largest dollar decrease in values at $747 per acre, while Monona County reported the largest percent decline at 8.4 percent.

Survey respondents most commonly cited lower commodity prices, high input prices, livestock losses, weak cash rental rates and a weakening global economy as negative influences on land values.

The ISU Land Value Survey was initiated in 1941 as the first of its kind in the nation.

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