Iowa farmland values plateau after two years of record highs

Iowa’s farmland values, which saw consecutive record-breaking increases for two years, are now showing signs of cooling, though they remain near historic highs. Several factors contributed to this slowdown, including drought, declining farm profits and rising costs and interest rates, the Des Moines Register reports.

Despite these challenges, Iowa's farmland prices inched up 0.6% in September compared to the previous year, as reported by the Realtors Land Institute-Iowa Chapter. Additionally, the Chicago Federal Reserve reported a 2% annual increase in farmland values in July.

While the rapid, double-digit growth of the late 2020s has tapered off, experts emphasize the market’s overall stability. In 2022, values surged 10.4%, averaging $13,742 an acre, after a strong 43.3% increase in 2021. However, in the first half of this year, average farmland values dipped 2.6% to $13,385 an acre.

Market observers note that, although record-breaking sales are not as frequent as before, they are still occurring, and farmland remains a highly sought-after commodity. Factors like strong farm profits and limited availability contribute to this market’s continued strength. However, ongoing drought conditions in Iowa and rising interest rates have affected buyers’ confidence and created downward pressure on the market.

Despite these challenges, experts anticipate that better-than-expected yields this fall and potential supply disruptions in global markets could boost interest in Iowa farmland, potentially leading to another increase in land prices.

Additionally, Iowa’s rising farmland values impact land rental costs, with rents increasing by 17% since 2020. High-quality farmland, in particular, is seeing rent rates well above the average. Despite rising input costs, interest rates and the possibility of lower crop and livestock prices, farmers continue to view farmland as a long-term investment.

Bottom line: The optimistic outlook among farmers suggests a continued demand for farmland in Iowa, even in the face of current challenges and uncertainties. The limited availability of farmland, with some tracts not becoming available for decades, underscores the importance of seizing opportunities to acquire land for future generations.