Farmland values surge

Mar 20, 2008 (The Gazette - McClatchy-Tribune Information Services via COMTEX) -- NO MATCHES FOUND. | news | PowerRating | PR Charts -- A scarcity of good Iowa cropland for sale and continued demand pushed the average price of all farmland up 11 percent in the six months that ended March 1, according to a survey released Wednesday.

Iowa Farm and Land Chapter No. 2 of the Realtors Land Institute said specialists in farm and land sales, management and appraisal were asked to estimate the average value of bare, unimproved land with a sale price on a cash basis.

Combining the 11 percent increase from Sept. 30 through March 1 with the 7.1 percent increase reported in September indicates a statewide average increase of 18.1 percent for the year from March 1, 2007, through March 1.

That figure is virtually identical to the 18 percent increase reported in a recent survey of bankers by the Federal Reserve Bank of Chicago.

All nine crop-reporting districts in Iowa showed an increase. The districts varied from an 8.7 percent increase in north central Iowa to a 14 percent jump in southwest Iowa from Sept. 1 through March 1.

In east central Iowa, cropland value rose 9.6 percent and in northeast Iowa the average farmland value increased 11.9 percent.

Troy Louwagie, real estate coordinator for Hertz Real Estate Services in Mount Vernon, said a variety of factors are pushing up farmland values.

"The No. 1 factor that we've seen is strong corn and soybean prices," Louwagie said. "That has increased profitability and improved farm incomes.

"We're also seeing limited supply. When a good farm comes up for sale, there's a strong demand for it.

"We've seen a little less demand for recreation property. That's typically bought with disposable income and the drop in the financial markets has slowed that down just a little.'' The Realtors Land Institute also cited continuing expansion of ethanol plants in the state, good crop yields and positive attitudes about agriculture as factors contributing to an increase in cropland prices.

The agricultural Realtors said several factors could affect farmland value in the future, including the uncertainty of government programs with the provisions of a new farm bill far from settled, increased fuel and fertilizer costs, and decreasing returns in Iowa's livestock industry.

Iowa led the five-state Federal Reserve Seventh District in the year-overyear rate of farmland value increase.

Indiana farmland rose 16 percent during the same period, Illinois and Michigan farmland prices rose 15 percent and Wisconsin trailed with an 11 percent annual increase in farmland values.

Louwagie said farmers have been the primary purchasers of farmland in the last six to 18 months. He said the debt-to-equity ratio for Iowa farmers is very low and interest rates continue to be very favorable.

Bankers in the Federal Reserve district, which includes Iowa, said agricultural credit is strong with a very low rate of loan deficiencies.

Contact the writer at (319) 398-8366 or george.ford@ gazettecommunications.com

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