Land Value History Made in 2011; Will It Continue?
08 February 2012
US - The Midwestern land market saw exceptional strength the last half of 2011 due to high commodity prices and record-setting net farm income.
Meanwhile, the supply of farm properties offered to the market rose during the final third quarter of the year as sellers moved to capture strong land prices. In addition, some landowners wanted to close a sale in 2011 rather than risk a change in tax rates and rules in 2012.
The result has been an extremely active market featuring strong values in the face of larger supplies - signs of a very healthy market.
The annual land values survey conducted by Iowa State University reinforces our findings. The survey found the value of an acre of Iowa farmland reached $6,708 by November, a rise of $1,644 or 32.5 per cent compared to a year earlier.
The 32.5 per cent increase reported by the survey is the largest percentage increase in the history of the survey. The previous record was 31.9 per cent set in 1973. That is when land valued rose $154 an acre to a state average of $635 an acre.
For the fourth year in a row, the northwest Iowa crop reporting district reported the highest average land value -- $8,338 per acre. The northwest district is the only district to feature an average land value in excess of $8,000 an acre. Four crop districts list an average land value in excess of $7,000 an acre. In comparison, last year only one district reported an average land value in excess of $6,000 an acre.
The northeast district reports an average land value of $6,602 an acre. The southwest district lists an average value of $5,905 an acre, while the southeast district reports an average value of $5,705 an acre. The south central district, traditionally the lowest-valued land in the state, lists an average value of $3,407 an acre.
By land quality, the survey pegs the value of high quality Iowa land at $8,198 an acre, up 34.2 per cent from last year. The survey lists the value of medium-quality farmland at $6,256 an acre and the value of low-quality farmland at $4,257 an acre.
Will this demand strength continue?
Of course, only time will tell. The market will face several challenges in 2012 including lower commodity prices, higher input costs and considerable uncertainty about the global economy. However, the number of properties offered for sale do not appear to be as high as seen in the last third of 2011. If interest rates continue to remain near historically low levels, this will mean the number of alternative investments will be limited.
For more information, contact Hertz Farm Management at www.hfmgt.com.
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