Iowa Farmland Climbs to Record as Income Gains, Survey Says

Farmland values in Iowa, the biggest producer of corn and soybeans, climbed to the highest ever level in 2011 on surging farm income, according to an Iowa State University survey of real-estate transactions.

The value of agricultural land surged 32 percent to an average of $6,708 an acre in the year ended Nov. 1, up from a previous all-time high of $5,064 in 2010, the university in Ames, Iowa, said today in a report. The survey, which shows the biggest increase since at least 1970, “covers one of the most remarkable years in Iowa land value history,” said Mike Duffy, the Iowa State economist who conducted the survey.

“Land values should remain strong for the next several months at least,” Duffy said in the annual report. “Beyond that there is a fair degree of uncertainty with respect to whether land values can maintain their current levels.”

The value of the land and gross farm income are “highly correlated,” Duffy said in the report. Rising farm income has been the “ primary cause” for higher farmland values, according to the report. The average value of an acre of U.S. farmland reached a record $2,350 in 2011, the U.S. Department of Agriculture said in August.

Net-farm income will climb 28 percent to a record $100.9 billion this year, the USDA forecast on Nov. 29. The U.S., the world’s biggest agricultural exporter, shipped a record $137.4 billion of farm goods overseas in the year ended Sept. 30, the government said last month.

‘Bubble’ Concerns

High quality land in Iowa rose 34 percent to $8,198 per acre, according to the report. O’Brien County, in the northwest, had the most valuable farmland in the state with the average acre valued at $9,513, up 33 percent, according to the survey. Decatur County in south-central Iowa for the second straight year had the lowest average at $2,721 per acre. That’s still up 31 percent from 2010.

“This rate of increase in 2011 has led to concerns that farmland may be the next speculative bubble,” Duffy said in a statement. “Some people feel farmers are setting themselves up for a fall similar to the 1980s. Without a doubt, it’s an interesting time and something to watch, but it isn’t a time to panic.”

About 74 percent of the farmland was purchased by farmers, survey data showed. Sales to investors represented 22 of farmland sold in the past year. Respondents reported 42 percent more sales than in 2010 and 16 percent reported fewer farms were sold.

The survey results were based on 487 responses from real- estate brokers and selected experts on land-market conditions. Participants were asked to estimate the value of high-, medium- and low-grade land in their counties as of Nov. 1.

Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans, hay and wheat, government data show. The U.S. is the world’s largest grower and exporter of both corn and soybeans.

To contact the reporters on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net; Jeff Wilson in Chicago at jwilson29@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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