Farmland Values Still Climbing

Iowa farmland continues to increase in value.

by Jon Hoffman

Oskaloosa, Iowa – When it comes to investing, Iowa farmland has been a pretty good option. A parcel of land recently set a record in the Northwest corner of Iowa, selling for $21,900 dollars per acre. That’s $16,000 per acre more than the average Mahaska County sale price. But still, the price of farmland is going up locally, tripling since 2000. CRI Ag reporter Jon Hoffmann takes a closer look at the price tag on farmland.

If you want to be a farmer, you’ll need the land to do it…and that doesn’t come cheap.

“I would say there is still a future in agriculture, but it is extremely difficult to get into it if you have no land base to start with or some economic base to begin with.” – Darrell Limkeman, Mid States Farm Management

Limkeman is an accredited rural appraiser and farm manager with Mid States Farm Management working in Iowa, Illinois, and Missouri. He has been at it for 37 years, but says this year has been a bit different.

“It has been interesting. A number of my clients have decided to sell this year, because of an overriding fear of an increase rise in capital gains.” – Darrell Limkeman, Mid States Farm Management

Bob Wells, local ag economist agrees with Limkenman’s clients.

“Right now it is a very unknown what is going to happen to capital gains taxes.” – Bob Wells, ISU Ag Economist

In 2000 an average acre of Mahaska County farmland was valued at $1,600. Now it is $5,700. Using round numbers, selling that land means a $4,000 profit that is subject to capital gains tax. That rate is now 15%, meaning paying tax of $600 per acre.

“After the first of the year, we don’t know what it will be but it will be a lot higher than that. So estates, people that are retiring from farming. They are looking at that as one of the drivers of going ahead and selling their ground now as opposed to waiting until the first of the year.” – Bob Wells, ISU Ag Economist

Look at this graph that shows the average value per acre of Iowa farmland climbing, and climbing fast. But when will it stop?

“If I knew what land values were going to do I’d be in Chicago smoking big cigars rather than managing farms out of southeast Iowa. I think you are going to see it directly relate with interest rates which are at all time lows and with commodity prices which are at all time highs. As long as that persists, this land will continue to go higher because it is a limited asset.” – Darrell Limkeman, Mid States Farm Management

“It’s true they are not making anymore land and that seems to be one of the problems.” – Bob Wells, ISU Ag Economist

This map shows the retail value of land in Iowa by county. The darker the shade of grey, the higher the price of the farmland. But remember, this is just what land is selling for. Good farmland is taxed more than poor farmland.

“There is an assessed value and then there is the retail value and the assessors have a formula here in Iowa that they use to set the value of agricultural land and it all goes back to what we call the corn suitability rating. The corn suitability rating is a measure of productivity and it allows the assessor to look at a farm in the New Sharon area and compare it with a farm in the Freemont area so that the taxes balance out so it is the productivity is what is taxed.” – Bob Wells, ISU Ag Economist

Taxes on Mahaska County farmland alone brought in $6.3 million dollars to the county last year. For CRI Weeky News, I’m Jon Hoffmann.

The average value of farmland in Iowa is $6,700 per acre, that’s about $1,000 more than the average in Mahaska County. There are many reasons why the average land value is lower here than in other parts of the state. They include land productivity, smaller sized farms, and the willingness to sell or NOT to sell farm-ground. Regardless, Bob Wells says producers in Mahaska County are just as profitable as others in the state.