Iowa farmland values continue record rise despite higher interest rates

(Nati Harnik | AP Photo/Nati Harnik, File)
Published: Dec. 16, 2022 at 4:11 PM CST
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AMES, Iowa (KWQC) - Iowa farmland values continue to set new records. After rising 29-percent in 2021, the Iowa State University Extension Service says the average value of an acre of Iowa farmland jumped another 17-percent this year to $11,411 per acre. That’s the highest level since ISU began surveying values in 1941.

Wendong Zhang, an associate professor of economics and faculty affiliate of Center for Agricultural and Rural Development at Iowa State University, is responsible for conducting the annual survey and said while higher interest rates put downward pressure on the land market, the effects typically don’t show up in land prices for one or two years. I addition, 81-percent of Iowa farmland is fully paid for, so the higher interest rates don’t always affect land purchasing decisions.

For the first time, this year’s survey asked respondents’ their views of current farmland values. Zhang said that 70-percent of respondents feel current land values are too high or way too high.

“The higher land values do create an even higher entry barrier for beginning farmers, and the following increase in cash rents along with higher input costs could negatively affect producers, especially those with a lot of rented ground,” he said. The most frequently mentioned positive factor influencing the land market was higher commodity prices.

Land Values by County For the second year in a row, all 99 of Iowa’s counties showed an increase in land values. However, for the first time in almost a decade, Scott County did not report the highest overall value. O’Brien County topped the list this year, reporting a 20.6-percent increase to $16,531 per acre. Decatur County again reported the lowest value, while still higher than last year, at $5,566.

The average price for farmland in Illinois was $7,284 in 2021, which was 28-percent higher than 2020 according to the Illinois Society of Professional Farm Managers and Rural Appraisers.