CHICAGO, Ill. (Reuters) — Farmland prices in Iowa have set a new record for the fourth year in a row.
However, an Iowa State University researcher said most land brokers and other industry specialists expect weakness ahead because of falling crop prices.
The average Iowa farmland value this year was estimated to be $8,716 per acre, an increase of 5.1 percent from last year, according to results of the Iowa Land Value Survey conducted in November.
“The land value survey shows a market in flux, fluctuating between strong sales and poor sales,” said Michael Duffy, the Iowa State farm economist who conducts the annual survey
“It’s a question of whether the market is at a plateau, a peak and due for a correction, or catching its breath before it starts taking off again.”
Iowa, the country’s top corn and soybean producing state and a major hog and cattle producer, is a bellwether for the U.S. farm economy, which has seen an historic boom in the last five years driven by biofuel demand and food exports.
The Iowa survey is based on reports by licensed real estate brokers and selected individuals considered knowledgeable of land market conditions. This year’s survey is based on 674 county land value estimates from Iowa’s 99 counties.
Duffy said many respondents commented that the current Iowa farmland situation might be “a plateau.”
Scott County, with an estimated $12,413 per acre average value for all farmland, saw the highest average county values in the Iowa State survey.
The county, located in east-central Iowa, also had the highest percentage increase and highest increase in value of any county: 12.45 percent and $1,374, respectively.
The Northwest District reported the highest land values at $10,960 per acre, but that was a decrease of $445, or 3.9 percent, from last year.
O’Brien County showed the highest dollar decrease this year of $478. Osceola, Dickinson and Lyon counties along with O’Brien County all shared the greatest percentage de-crease at 3.72 percent.
The results were in line with a recent quarterly survey of Midwest farmland by the Chicago Federal Reserve Bank, which reported steady to weaker land prices in the third quarter for the first time in years as crop prices fell on the outlook for a record grain harvest.
“The results of our survey — up five percent — occurred primarily in the first six months of the year,” Duffy said.
“Since then, as corn prices dropped land values have either stabilized or dropped a little.”
Duffy said many competing forces will influence prices over the coming years, but for now it appears there are more factors that will lead to lower prices.
He said farmland values are highly correlated with gross farm income, and most survey respondents were concerned about income.
Seventy-six percent of respondents cited lower commodity prices as a negative factor affecting land markets.
Data show the rate of increase in land values slowed and commodity prices started dropping after June, Duffy said.
Farm income is a strong indicator for the direction land values will go, but interest rates remain low and the volume of farmland for sale is down from a year ago.
Duffy said the percentage of re-spondents who reported fewer sales in 2013 than in 2012 was the highest it’s been since 1985.
Duffy said the Iowa average corn price dropped 33 percent from October 2012 to October 2013, while soybean prices dropped 11 percent.
The November estimated price for Iowa corn was 39 percent lower than the November 2012 price, while soybean prices were 11 percent lower.
Duffy said land values will likely drop if projections of a new lower level for commodity prices hold.
“But the odds are pretty low of major collapse in land values because I think the odds of a major collapse in grain prices is pretty low.”