Iowa Farmland Values Steady, After Two Years of Record Highs- Des Moines Register

Donnelle Eller reported on the front page of Tuesday’s Des Moines Register that, “Following two years of record highs, Iowa farmland values have plateaued: Rising interest rates, declining profits and drought are cooling buyers’ enthusiasm, experts say.

“Despite the slowdown, Iowa farmland prices remain close to record highs, two new reports show. They crept 0.6% higher in September compared to a year ago, according to the Realtors Land Institute-Iowa Chapter report. And the Chicago Federal Reserve showed them inching 2% higher in July compared to a year earlier.

“‘We’re not on that aggressive, double-digit, year-after-year climb’ that began in late 2020, said Jim Rothermich, a vice president at Iowa Appraisal in Des Moines. ‘But the market remains steady.'”

The Register article stated that, “Rothermich’s data shows values climbed 10.4% last year over 2021 to average $13,742 an acre. That’s after jumping 43.3% to $12,450 an acre in 2021 over 2020.

“Through June this year, average farmland values dropped 2.6% to $13,385 an acre, compared to last year, Rothermich said. The Realtors Land Institute shows a slight cooling, with a 0.2% decline over the past six months, ending in September.”

Eller pointed out that, “Interest rates are the fastest-growing farm production expense, increasing 19.1% in 2023 and 33.2% in 2022, the USDA said in an August report. Farm debt is expected to reach a record high this year.”

With respect to cash rents, Eller explained that, “So far, Iowa farmland rents have climbed 17% since 2020, averaging $269 an acre this year, USDA data shows. That has wide impact on growers, since about 60% of Iowa farmers lease cropland.”

Recall that in the Federal Reserve’s October 2023 Beige Book update last week, the Chicago Federal Reserve District indicated that, “Prices for agricultural land showed signs of softening, especially for ground of lesser quality. Rising interest rates stretched farm finances given high debt levels of many operators.”

And the Federal Reserve Bank of Kansas City noted last week that, “Average interest rates on all types of farm loans increased for the seventh consecutive quarter and reached the highest level since 2007.”