ISU 2020 Land Value Report | What It Means
Iowa Farmland Values in 2020
The 2020 ISU Land Value Survey was presented last week. This is a report we watch closely each year. Iowa State does a great job each year putting this together, and it offers a big picture view of farmland prices across the state.
Seeing that farmland prices rose across the state in 2020 was not a surprise to us. It tracked with the experiences we had in the field this year, and can be taken as a sign of good farmland demand. When interpreting the results of this land value survey, I think its important to understand that it is an opinion survey and not an actual measure of actual sale prices.
Farmland Auctions and Farmland Sales Held Strong
We saw COVID initially take its toll on some farms that produced immediately available products such as milk, as well as some farms where the longer-term crop came to maturity at the beginning of the pandemic. As the year played out, we saw the pandemic affect farmland prices in other ways especially where land became a more attractive investment when stock market concerns developed. Some investors bought land knowing the pandemic would pass in time, and some saw this as an opportunity to buy land thinking the pandemic was dampening prices.
Government payments in 2020 certainly helped farmland prices gain value by stabilizing the farm sector of our economy. I’d be missing at least one point if I did not mention the marketability of our commodities. This issue has yet to fully resolve itself, but takes up less space in the news compared to earlier in the year. More normalized trade relations, no matter the form, won’t hurt the market in the least. Demand for our products will always affect the value of farmland.
The stability of farmland ownership will always be appealing in difficult times where investors aren’t sure where to turn. Over the last decade, we’ve seen almost every possible scenario that could hurt farmland prices: floods, droughts, persistent low commodity prices, a pandemic… At least in an environment with low interest rates, nothing has done much to chip away at the value of land.
Land Values in Iowa – 1.7% Growth
2020 was a pretty standard year in farmland price appreciation. We always expect to see between a 1.2% and 2.1% growth. We landed right within that gap this year at a 1.7% average increase.
The last 12 years has brought about a period of political uncertainty that has affected buying and selling decisions. I fully expect the next 4 to 8 years will bring an equal amount of political uncertainty (possibly more) until we have a President that the right and left can find a sort of neutral under. Maybe it’s a new permanent part of our society.. but like all things, the pendulum swings. I’m positive we are not through with the period of political strife just yet.
I think ethanol remains a significant long-term issue for agriculture. A very significant portion of our corn crop goes toward ethanol production. Recent advances in battery technology, and increases in the production of electric cars certainly presents an interesting scenario that has the potential to affect the demand for corn. As those products mature and accelerate, it is my opinion that this could become one of the most significant issues facing landowners today. Certainly, alternative crops present a positive solution. But the emergence of any of them has been very slow, and the demand has not been significant enough to have even the slightest of impacts to this point.
If you’re interested in viewing ISU’s full report, we’ve included the link below!
CAI Auctioneer, Land Broker
Founder, Auctioneer, Broker, and Agent at DreamDirt, Jason Smith is a lead farm real estate professional in the Midwest. He has achieved the pinnacle of auction education earning the CAI designation and is one of only 11 CAI auctioneers in Iowa. Jason graduated from the World Wide College of Auctioneering, and has achieved the PRI designation from the Professional Ringmen Institute. Jason and his wife founded DreamDirt in 2005, and the company continues to be a leader in the farm auction space and prides itself in offering extensive land seller and buyer information.
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