The value of Iowa farmland rose slightly in 2020, according to research at Iowa State University. The estimated statewide average of an acre is now $7,559, which is an increase of $127, or 1.7 percent since November 2019.
In Wright County, the average value of an acre rose to $8,765, which is up $49 from last year. One year ago, land prices were up $71 per acre. Wright County land had a value of $10,786 in 2013, an historic peak.
C. Gordo $7,762
“Starting in 2004, several factors, including the ethanol boom and historically low interest rates, drove five consecutive years of double-digit growth in average farmland values, culminating in an historic peak of $8,716 per acre by 2013,” said Dr. Wendong Zhang, assistant professor of economics at Iowa State University.
“Average farmland values then began an immediate decline, dropping 8.9 percent, 3.9 percent, and 5.9 percent in the following three years. Those declines were the first time since the 1980’s farm crisis that farmland values had declined three consecutive years.” The bottom of the land market in recent memory was in 1986 when an average acre sold for $787.
Favorable interest rates, a strong demand for land, and substantial government payments helped stabilize Iowa’s farmland market in 2020, a year when Iowa’s farmers faced a destructive derecho, significant uncertainties in U.S. agricultural trade, and a pandemic that altered market demand.
“The land market faced downward pressure initially with the onset of the Covid-19, which lowered food demand and resulted in declines in livestock and ethanol prices,” said Dr. Zhang.
“The rebound in recent months is due to strong government payments, interest rate cuts, limited land supply, and recent commodity price rallies,”
In mid-November, both U.S. corn and soybean prices reached their highest point so far this year. Despite some decline since then, both prices are still higher than at the beginning of the year, especially soybeans.
Zhang also said that farm payments in 2020 helped prop up the farmland market “in a big way.”
According to the USDA’s Economic Research Service, farm payments will increase in 2020, and net farm income will increase 43.1% in 2020.
Some of the increase in overall land value this year is also due to increased demand for low-quality land in certain parts of the state. “Strong demand for pasture and timber grounds, which are even more appealing now with social-distancing requirements, contributed to the rise in low-quality land value,” Zhang said.