Ames, Ia. - Iowa's average farmland price rose 15.6 percent this year, hitting a record $2,629 an acre, according to the annual Iowa State University survey released Tuesday.
The increase of $354 an acre means the value of the state's 32.6 million acres of farmland rose $11.5 billion in the year ended Nov. 1, said Michael Duffy, the Iowa State Extension economist who conducts the study.
When Iowa's average farmland price is adjusted for inflation, Duffy said, 2004's record farmland price is the equivalent of land prices in 1973. That was the beginning of the historic farmland boom, which led to the 1981 peak of $2,147 an acre.
After the 1981 peak, Iowa farmland lost 63 percent of its value, falling to a statewide average of $787 an acre.
In the past 18 years, the average price of Iowa farmland has increased 234 percent. In the past five years, prices have gone up about 47 percent.
This year's survey saw several firsts:
• Average farmland prices in all 99 Iowa counties topped $1,000 an acre.
• Scott County recorded an average price of $4,167 an acre, the first time the average price of farmland in an Iowa county was more than $4,000 an acre.
This is the fifth year in a row that Iowa farmland prices have risen after small drops in 1998 and 1999.
Hardin County farmland had the biggest percentage increase - almost 23 percent. The smallest percentage increase was 7.7 percent in Jones County.
Humboldt County had the largest dollar increase, $592 an acre.
Calhoun, Dickinson, Hamilton, Hancock, Hardin, Plymouth, Webster and Wright counties all had average farmland prices rise more than $500 an acre in the past year.
Duffy said the rapid run-up in Iowa farmland prices in the past five years has spurred many people to ask if another land crash is pending, similar to what happened in the early 1980s.
Factors that will influence the direction of Iowa's farmland market, Duffy said, include the Federal Reserve Bank's grasp on inflation, the size of government farm program payments, future federal budget deficits and global trade regulations.
One big difference between now and 20 years ago, Duffy said, is that about 60 percent of Iowa's farmland then was free of debt. When interest rates shot skyward, many farm real estate loans became untenable and the land came back on the market, further eroding Iowa's farmland values.
Today, slightly more than three-fourths of Iowa's farmland has no debt on it, he said, making the state's farmland much less vulnerable to increases in interest rates. Another difference is that government farm payments, which have totaled $11.3 billion to Iowa farmers between 1995 and 2003, have underpinned the price of Iowa farmland, Duffy said.
Between 25 percent and 50 percent of Iowa's farmland prices are attributable to government farm payments, Duffy said.
That wasn't true in the years before the 1981 peak in farmland prices, he said.
If farm programs become a political target because of huge federal budget deficits, land values would suffer, Duffy said.
Another concern: Other countries are challenging U.S. farm subsidies through the World Trade Organization.
If the corn program is found to violate world trade rules, the resulting drop in subsidies could have a big impact on farmland prices, Duffy said.
The Iowa State survey results were in line with other farmland price surveys released this year.
Iowa Farm & Land Chapter No. 2 Realtors Land Institute, a group of farm real estate brokers, said a survey of their members found that Iowa farmland had an annual increase of 15 percent in the year ended Sept. 1.
The Chicago Federal Reserve Bank reported a 12 percent increase in the year ended July 1.
The Iowa State study surveys real estate brokers, farm lenders and others who work directly with farmland markets.
Duffy said that of the 1,100 surveys sent out, about 70 percent were returned.
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