2021 Iowa Farmland Value Recap

2021 has shown an increase in many asset classes across the globe, and Iowa farmland is no different. The 29% increase in farmland values is hard to grasp following a 2020 farmland market where buyers were harder to find and many farms were not selling quickly when offered to the public. Many factors accounted for the increased land prices with a few factors being historically low interest rates, inflation, and the increase in grain prices.. In this recap, we will dig into the current day market and a crystal ball on what the future holds for high farmland values. Provided below is the recent Iowa State Extension Ag Marker survey recap. This report was consolidated with past sales data in the 2021 calendar year along with industry professional insight on market trends and an overview of the current market. We want to note this report is not a report per farm to farm but rather trends in the general marketplace. Please click on the photo below to reach the Iowa State Extension 2021 Farmland Value Survey. 

Source* Dr. Zhang – Iowa State University

Record Amount of Land Offered Via Public Auction in 2021

Iowa saw a huge increase in farms offered to the market in 2021 with some 147,000 acres being offered on public auction. A few factors play into the large acreage sell off with more “what would have been” traditional listings in a normal market that were instead offered to the public via live auction due to the aggressiveness of the market. Also,a factor to note was the competitive structure of buyers in the market began to rise in late 2020 and early 2021 turning the market into a seller’s market with demand heating up mid year in 2021. Year 2022 will be no secret with high quality Iowa farmland trading on the block to maximize value for sellers looking to capitalize on record high farmland values.

Source* Jim Rothermich Iowa Appraisal

Big Factors That Might Shift The Land Market

Starting in mid 2020, we began to see a reduction in interest rates offered by lenders throughout the state. Due to Covid-19, the government tried to stimulate the economy where we began to see almost artificial interest rates begin to be offered to keep money in circulation. Fast forwarding to 2021, we have seen farmland mortgage rates the lowest ever recorded on record. As we get into early 2022, we are beginning to see rates increase due to the 7% inflation rate recorded in December 2021. Economists believe the feds will continue to raise rates and local lenders plan to do the same. The big unknown is how high these rates might go?

Corn and soybeans are the predominant crop here in the Hawkeye state and play one of the biggest roles in the trajectory of Iowa farmland values. As of today, we are seeing sub $5.70 cash bids on corn and $13.00 soybeans at local grain elevators. These are historically great prices history shows. A $1.00 shift up or down in the corn market and a $3 shift up or down in the soybean markets could change the outcome on Iowa farmland values. For a producer profitability is the number one goal in a fiscal year growing season. 2021 was a money making year for many producers with low input cost and rising grain prices. 2022 could show some shift in this arena with input cost beginning to climb aggressively.   

Government support for the producers has been very lucrative over the past 2-3 years with trade war payments, PPP loans, and subsidies have helped increase cash positions for many farmers in rural Iowa. Cash is king and many producers like to wait for the right farm to come up before they purchase a farm. As a result of these factors, the 2021 growing season was the perfect storm for a rise in farmland prices.     

What 2022 Could Mean In The Iowa Farmland Market

Looking ahead to 2022, there are many variables that could affect the market and no one knows what the future holds for Iowa farmland values. We have seen a rise in commodity prices, increase in input costs, historically low interest rates, and huge buyer demand to start the year. If we were to take the over under on another 29% increase in farmland values, we would tend to agree our farmland brokers would take the under. With that being said, there could still be some strength in the current market. Looking at current farmland prices, the probability of top end pressure is probably more likely in 2022 than 2021 if we see grain prices fall and interest rates increase. The good news is Iowa farmland has never been valued higher in history. This helps the producer just as much as the farmland owner. For additional information and insight on the Iowa farmland market contact your local Iowa Land Company broker today.

To talk to one of call Iowa Land Company’s Land Brokers, agents, auctioneers, or appraisers call (515) 962-5048 or email us at info@iowalandcompany.com