Posted by Dr. Wendong Zhang
April 19, 2018 at 5:30 AM

Iowa Land Auction Results: Q1 2018

q4-2018-FarmlandFinder

It is hard to distill true market trends with only 200 auctions over a quarter, however if we believe in the numbers, they revealed several interesting trends:

  • The average price for both all farms ($7,430/acre) and 85% tillable farms ($8,416/acre) are still higher than that a year ago.
  • Interestingly, the prices also show signs of weakness compared to the last two quarters.
  • The number of sale activity, although low, nearly doubled compared to quarter 2 and quarter 3 in 2017.

Land Values Increase

This first observation is consistent with the March 2018 Realtor Land Institute survey, which reported a 2.9 percent increase in Iowa cropland values over the past six months. However, rather than a result of improved economic fundamentals, limited land supply is the main factor driving recent bump in farmland values. Put simply, one could think of land value being net income divided by interest rates. USDA forecasted a 6.7% in US net farm income this year, and Federal Reserve is likely to keep increasing the interest rates, which both exert downward pressures on the land market.

Strong Agricultural Economy

Overall, the agricultural economy is still strong, and my analysis with Ms. Kristine Tidgren shows that we aren’t likely to see a replay of 1980s farm crisis. However, we now face substantial uncertainty especially given growing US-China trade dispute which already hits pork and might affects soybeans.

In this time of change, I would like to encourage anyone interested in the land market to attend the ISU 91st Soil Management Land Valuation Conference in Ames on May 16 Wednesday, and also offer your land and crop price estimates via a 3-minute brief survey.

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Dr. Wendong Zhang
Written by Dr. Wendong Zhang

Dr. Wendong Zhang is Assistant Professor of Economics and extension farm management specialist at Iowa State University. Since joining ISU in fall 2015, Dr. Zhang has been the lead researcher of the annual ISU Land Value Survey, the forthcoming 2017 Iowa Farmland Ownership and Tenure Survey, as well as the ISU 91st Soil Management Land Valuation Conference in Ames on May 16.

Topics: land values