Iowa Farmland Prices Explode 29% Higher

The average value of an acre of Iowa farmland skyrocketed 29% in 2021, according to Iowa State University’s (ISU) annual survey. The nominal value of an acre of farmland is now higher than at any point since ISU began surveying values in 1941. It addition, it is 12% higher than the previous peak in 2013; although the current value in inflation-adjusted terms is still lower than that for 2012 and 2013.

The last time farmland values increased more than 25% was in 2011, when values rose 32.5%. “Surging ethanol demand and high commodity prices were two of the significant factors driving the increase in 2011,” says Wendong Zhang, ISU associate professor of economics who conducts the annual survey. “The increase this year is in part due to much stronger commodity prices thanks to higher exports, stronger than expected crop yields, and strong ad hoc COVID-19 related government payments,” Zhang says.

The survey found the average statewide value of an acre of farmland is $9,751, an increase of 29%, or $2,193, since 2020. The $9,751-per-acre estimate, and 29% increase in value, represents a statewide average of low-, medium-, and high-quality farmland.

Zhang says favorable interest rates also contributed to the increases in 2011 and this year; however, he noted that inflation was a very important factor behind the value increase this year as well. Last week, the U.S. Bureau of Labor Statistics reported the U.S. inflation rate rose 6.8% over the last year, which was the largest increase since 1982.

“Inflation is driving some investors to consider farmland as an alternative investment asset because farmland value tends to rise with higher inflation. The inflation-adjusted average value rose 21% but the nominal value rose 29%, which shows the effect of inflation,” Zhang states.

As for U.S. net farm income, Zhang says it is forecast to grow $22.0 billion (23.2%) from 2020 levels to $116.8 billion in 2021, which is the highest level since 2013. “The increase in 2021 farm income is largely driven by the rises in commodity prices and the resulting crop and livestock receipts, as opposed to almost solely ad hoc federal government payments as in 2020,” he observes.

After the large increase in 2011, farmland prices jumped another 23.7% in 2012, though Zhang says that while 80% of respondents had optimistic views about what the farmland market would look like one year from now, most report they expect values to increase less than 10% in 2022.

Looking five years ahead, Zhang says the number of respondents expecting a decline in farmland values nearly doubled, but more than 80% of respondents predict farmland values would rise another 10% to 20% over 2021 values.

Land Values by County

All 99 of Iowa’s counties show an increase in land values. For the ninth consecutive year, Scott and Decatur Counties reported the highest and lowest values, respectively. Land values in Scott County increased 30%, or $3,193 per acre, to $13,852. Land values in Decatur County increased 31.5%, or $1,213 per acre, to $5,062.

Clayton and Allamakee Counties report the largest percentage increase, 36.4%, while Scott County saw the largest dollar increase, $3,193 per acre. The smallest percentage increase, 23.2%, was reported in Keokuk County, while Taylor County saw the smallest dollar increase, $1,199 per acre.

Land Values by District

Land values across all crop reporting districts increased. The Northwest district reports the highest overall value, $12,164 per acre, while the North Central district lists the largest percentage increase, 34.5%, and the largest dollar increase, $2,737 per acre.

The South Central district reports the lowest values, $6,035 per acre, and the lowest dollar change, $1,377 per acre, while the Southeast district saw the smallest percentage increase, 21.9%.

Land Values by Quality

Statewide, low-quality land now averages $6,397 per acre, an increase of 26% or $1,319 per acre. Medium-quality land now averages $9,071 per acre, an increase of 27.4% or $1,953 per acre. High-quality land now averages $11,834 per acre, an increase of 30.5% or $2,766 per acre.

The Northwest district reports the highest values for low-, medium-, and high-quality land at $8,088, $11,042, and $13,997 per acre, respectively. The South Central district reports the lowest values for low-, medium-, and high-quality land at $4,058, $6,094, and $8,194 per acre, respectively.

Low-quality land in all crop reporting districts, less the Southeast district, saw increases of more than 23%. The North Central district saw the largest percentage increase, 32%, and the largest dollar increase, $1,695 per acre. The Southeast district showed the smallest percentage increase, 14.5%, and the smallest dollar increase, $600 per acre.

Medium-quality land saw increases of more than 30% in the North Central, Northeast, West Central, and South Central districts. The South Central district saw the largest percentage increase, 33.6%, while the North Central district showed the largest dollar increase, $2,291 per acre. The Southwest district reported both the smallest percentage increase, 22.3%, and the smallest dollar increase, $1,302 per acre, in medium-quality land.

High-quality land in the North Central, Northeast, West Central, and East Central districts all saw increases of more than 30%, with the North Central district reporting the highest percentage increase, 35.7%. The East Central district reported the largest dollar increase in high-quality land at $3,304 per acre. The Southeast district reported the smallest percent change in high-quality land, 25%, and the South Central district reported the smallest dollar increase, $1,786 per acre.

Factors Influencing the Land Market

The most frequently mentioned positive factor influencing the land market was higher commodity prices. Favorable interest rates and strong yields were the second- and third-most frequently mentioned factors. Other frequently mentioned factors included limited land supply, strong demand, COVID-related government payments, and a good farm economy.

The most frequently mentioned negative factor affecting land values was higher input costs. Other noted factors included concerns about the sustainability of high land prices, possible changes in interest rates, political uncertainty related to policies, such as tax law changes, and uncertainty related to COVID-19.

Land values were determined by the 2021 Iowa State University Land Value Survey, conducted in November by the Center for Agricultural and Rural Development at Iowa State and Iowa State University Extension and Outreach. Results from the survey are consistent with results by the Federal Reserve Bank of Chicago, the Realtors Land Institute, and the U.S. Department of Agriculture.