Iowa Farmland Values Fall, Breaking Five Year Trend

USAgNet - 12/20/2024

The annual Iowa State University Land Value Survey found that farmland values decreased 3.1%, or $369, to $11,467 per acre. The decrease this year nearly erases the 3.7% increase from last year and ends a five-year trend of increasing prices. The nominal value of an acre of farmland this year fell from last year's record high, but is still higher than the nominal value in 2022. When adjusting for inflation, the 2024 average value is 2.5% lower than 2013's inflation-adjusted values.

"We saw land values rise for five straight years, including surges of 29% and 17%, which naturally leads to a reset or balancing in the market," said Dr. Rabail Chandio, who is responsible for the annual survey. "If we look back to the previous peak in 2013, the market "adjusted" with relatively small declines spread over a few years."

Chandio said that survey respondents noted falling commodity prices, persistently high interest rates, and elevated input costs as factors that have tightened profit margins and placed increasing downward pressure on land values across the state.

While the Federal Reserve started cutting rates in late 2024, Chandio said the impact of the past two years of high interest rates is still weighing on farmland values. "It takes time--sometimes up to a decade--for interest rate changes to fully ripple through the land market; and, although rates recently dropped, with another cut on the horizon, it's not enough yet to ease the pressure from those earlier hikes as we move into 2025. If rates fall within a couple of years, we could see farmland values beginning to recover sooner. But if rate cuts take longer, we may see declines persist for another year or two," she said.

The lower commodity prices will also affect more than just land values--farm income is expected to fall 4.1% this year, following last year's 17.4% drop, as lower commodity prices weigh on crop cash receipts. "While crop receipts are down, livestock receipts are up 8.4%, offering some balance. So, livestock markets, like cattle and hogs, have fared relatively better, but high input costs are still exerting enough pressure to keep margins very tight," Chandio said.

Iowa's South Central crop reporting district was the only district to see an increase in land values. Chandio said that when land values in other parts of the state surged during the COVID-19 pandemic, the southern districts lagged behind. "While the South Central district saw an increase this year, the other two southern districts reported only minimal decreases, indicating a relatively stable trend overall," Chandio said.

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