Farm Profits Are Up- Land Prices Are Rising | Highest Farm Income Forecast Since 2013

Sep 6, 2021 | Iowa Farmland Prices

Jason Smith

Jason Smith

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.

Email: jason@dreamdirt.com | Phone: (712)213-6400

Land Prices Are Rising

By coincidence so are net farm profits.  It’s not much of a coincidence, one of the most basic principles of farmland prices is that when farms make money, they spend it.  Spending it on the one very thing that can grow an operation is a no brainer.  Think about it, if a farmer has 2,000 acres and two combines that work fine, does buying another combine contribute to their profitability?  Does adding a tractor increase profitability?  Beyond employing some new technological advance or filling an unfilled need its not likely equipment is going to make much of an impact on the growth of a farm.  Acres will.  Acres means more plants, more plants means more commodity to sell, more commodities means more money.  In fact, considering the economies of scale will make their existing equipment more profitable than it was with fewer acres.  In 2009, I used the line “Land is in Demand” in advertising.  Its gone on to be used by many land sale companies as a lead in their advertising and its never not been true.  Land is the #1 need of farmers, its the #1 thing that can increase production and grow their operation.

The newest USDA Farm Income Forecast shows a significant increase in the forecast of 2021 net farm income.  Previously forecasted in February 2021 at $128.3 billion the forecast was increased by 6.4 billion dollars to $134.7 billion dollars.  The increase represents a whopping 21.5% increase over the 2020 net farm income of 110.9 billion dollars!  These numbers are significant departure from most years and do represent a very strong farm economy in 2021 driven by low interest rates, increasing exports and higher commodity prices.

farm income chart
Iowa Farmland prices 1950 to present

This is a chart covering a different timeframe, but you can easily see the correlation between net farm income and the value of Iowa Farmland.  This graphic also shows an interesting picture of the buoyancy of farmland prices following times of a good farm economy.  Its easy to see after the run up in land prices in 2011 they immediately fell off and it took several years to put a bottom in the market when we then resumed more average appreciation.  You can also see that accent following the bottom was slow but net farm income remained near the top until 2014.  This shows the conservative financial habits of farmers as well as emphasizes the small window of farmland sales where you want to try to sell at the top of a market.  Its now!

Selling Farmland in 2021 and 2022

The strong market is likely to hold on through at least the cycle of money we are currently in and until new crops begin to get priced, or we see a change in the elements currently contributing to an increase in farmland values.  Changes in any of the elements or lower commodity prices are very likely to reduce the numbers we see today.  If you intened to sell farmland in the near future its very likely we have some time left to get your property prepared and on the market but how much time will be up to those factors above.  For many it becomes a very personal decision that can be inhibited or enhanced by factors only they can judge.   If you were to ask me, “is it a good time to sell farmland right now” I would without hesitation encourage you to call us today and get started.  We know where we are today, we don’t know where we will be in 2-3 months.  Trying to time the exact top of the market is difficult and financially dangerous.  Farmland prices tend to run up fast and fall off fast. Waiting for the market to gain more value isn’t likely to impact your bottom line by much for that very reason. Nobody knows if we are still going up or headed down on any given day, but we know where we are right now.  

land auctions in iowa

DreamDirt Farm Real Estate Services

  1. Live In-Person Auctions– Traditional Auctioneer led in-person on-site style auction.
  2. Online Farmland Auctions- Technologically advanced auctions with remote bidding.
  3. Hybrid Live and Online Auctions- A combination of live in person and online bidding simultaneously.
  4. Farm Real Estate Brokerage- Privately negotiated priced farm listings.
  5. Instant Offers- Get a private offer on your farm from investors within 7 days.

 

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