Iowa Farmland Prices 2016-2017
Auctioneer, Land Broker, Appraiser
Jason is an Auctioneer and Land Broker in northwest Iowa at Storm Lake and Mason City. Jason and his Iowa farmland team specialize in farmland sales primarily serving the heirs to family farms. Today's report details the current land market in Iowa for land being sold at auctions.
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Commentary by Broker | Auctioneer Jason Smith (712)592-8965
This morning as we reach September 1 we are at the beginning of the traditional farmland sales season as today is the tenancy notification deadline for landlords to discontinue year to year leases. If you are reading this article researching farmland prices for a sale in late 2016 or early 2017 that does not mean you can not sell your farm. It is very typical that during the sales season we get phone calls to sell farms that have a tenant already in place and that is fine, it just means that the tenant will have tenancy rights until March 1, 2018 so the buyer will be a landlord just like you for roughly the first year of ownership on the farm. The lease will transfer with he farm and the agreement you had in place just continues on to the new owner of the farm.
Where Are Iowa Farmland Prices Headed?
The big question today is where are farmland prices headed? Where will they be this sales season? You often hear statistics like “farmland in Iowa is down 10%” or “farmland averages have lost X% of value” While thats maybe the best way to convey the idea that farmland is currently losing value, its not a real clear picture for the individual farmland owner that is considering selling farmland. The fact that averages are used to convey the idea of falling farmland prices does not mean every farm in Iowa has lost X% of value. Farms are of all different make ups and quality, some have tile, some need tile, some are wet, some are in difficult locations, some are in great locations. Some have improvements on them such as grain bins. Some grain bins are new, some are old, some are big, some are small. Of course one of the driving factors in the value of the farmland is CSR2 and every farm has different soils and a different average weighted CSR2 rating. Not all farms are 100% tillable farmland either and farmland average values have a tendency to be stated for tillable acres. If you have a farm that is 160 acres but only 140 of those acres are tillable the 20 non tillable acres are worth something, but not the same as the tillable acres. Finally some farms are involved in government programs or have easements of sorts which can affect their value. These combinations of things affect the value of your farmland and using averages to calculate your value will often result in a poor appraisal of its actual value.
Classes of farmland in Iowa tend to be ranked more by CSR rating than anything else. The CSR ratings go from 10 to 100 and if you divide that in thirds to be 0-33 CSR2, 34-66 CSR2 and 67-100 CSR2 you can see the low, medium and high quality ratings. If you have a farm that is 80 CSR2 the averages have fallen less than if you have a farm with a 29 CSR2 rating.
In fact, today most farms with a CSR2 of 90 and above are closer to the market highs than any other and can on certain auctions still hit the highs. Farms with multiple negatives today have not been received well by the auction marketplace and listings may suit sellers better. Farms with late year CRP contracts (7th year and above), farms with mid field CRP and irregular boarders, tiling issues, low CSR ratings, access or easement issues, severe erosion issues, tenancy issues are among some of the issues we’ve seen sacking sellers across the state. This doesn’t mean you can’t sell those farms today at auction, you very much can but the market will price them accordingly and getting a price comparable to 2012-2013 most likely is not going to happen.
How Bad Is The Recent Drop In Iowa Farmland Values?
Despite the fact that farmland prices have dropped across Iowa here is the good news, you are only competing against the 2010-2014 time farm on farmland prices. 2016 2017 Iowa farmland prices are are still almost double what they were in 2009 at this point in time. With the new Realtors Land Institute survey due out anyway now we’ll get to see new numbers going into the sales season and have a better picture of what has occurred over the last 6 months with auction and land sale results. If I was to offer any advice to the seller of farmland today it would be to start now and get your farm on the market. Timing may have no effect on the right farms but the truth is we know where we are right now, we do not know where we will be in March 2017. Thats just a fact, nobody has a crystal ball to look forward and know exactly what will happen. As harvest begins and more information becomes know the market will react and what we know right now is that commodities are very low and experts are telling us we have a potential 4th record crop on our hands. A very simple understanding of supply and demand says that will have some effect on farmland prices. Will it be big or small? Farmland will always remain a valuable asset that is priced on its ability to create income and that value will always lag just behind the market. Are we in that lag period now?
Selling A Farm In Iowa? DreamDirt Can Help You Learn What Your Farm Is Worth.
If you are considering selling a farm and want to know what we feel your farm will sell for we’d gladly look at it and provide you with the right information to help you understand your situation and the value of your farm. Go to our How Much is My Farmland Worth and fill out the form and we will be glad to help you. If you would rather visit with somebody call us at (855)376-3478
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