Every five years, Iowa State University Extension undertakes extensive surveys of Iowa farmland ownership, tenure, and transition. This survey actually extends back to the 1940’s and was mandated by Iowa Code in 1989 to be conducted every five years. This survey was the first of its kind in the nation. The latest survey was released in June 2023 with an effective date of July 1, 2022. This survey has some very interesting and significant findings, especially in comparison to 1982.
Debt-free
The most notable finding has been the amount of Iowa farmland which is owned free of debt. That was 84% in 2022, a slight improvement from 82% in 2017. However, back in 1982 the finding was 62% held debt-free. What makes this so notable is the age of landowners in 1982 compared to 2022.
Age of Owners
In 1982, 25% of Iowa farmland was owned by folks under the age of 45. In 2022, that figure is less than 5%. Meanwhile, land owned by those age 65 and older increased from 29% in 1982 to 66% in 2022. Obviously, age and reduction of debt tend to go hand in hand. Debt in 1982 was record-expensive and became a difficult recipe for younger landowners with limited equity. An encouraging statistic in 2022 is that 70% of farmland owned by those in the 35-64 age category is debt-free.
Acquisition and Disposal
Respondents over the past five surveys have rated “purchase” as their method of acquisition 65-74% of the time. Most of the balance has been via inheritance, while a steady 3% is reported to have been “gifted”.
In 2022, 80% of landowners are not planning to sell, up from 69% in 2017. That’s a pretty strong increase in f ive years. I think you can credit Covid and inflation for adding to the attraction of maintaining land ownership.
The primary reason for owning farmland was “current income” favored by 56% of respondents in 2012. That declined to 38% in 2022, while “long-term investment” and “family or sentimental” rose from a collective 41% in 2012 to 60% in 2022.
However, Father Time is undefeated, on that we must all agree. Anticipated ownership transfer methods were surveyed.
- Willing the land to family remains the most popular; however, this also showed the sharpest decline from earlier surveys. 35% reported intentions to will to family.
- Putting land into trust has shown the sharpest increase. 26% reported intentions to put land into a trust. This was especially noted in west-central Iowa.
- Business entities such as LLC’s were chosen by 12% of respondents. • Give or sell to family was reported by 12% and 8%.
- Sell to others was the intention of 4%.
- Give or will to others accounted for 2%.
Professional Farm Management
The survey spends a bit of time on our profession of farm management. 5% of all leased acres in Iowa are handled by a professional farm manager. Leasing methods tend to be more “hands-on” with farm managers in place. Whereas 87% of leased farmland is cash rented, with farm managers 50% is cash rented (fixed or flexible). The other 50% are leased under some form of crop-share arrangement or custom-farming, which tend to provide higher returns and control of your land.
Conclusion
The aging of farmland ownership continues as 86% of Iowa farmland ownership is held by those 55 years and older. This has major ramifications for rural society as land ownership is extending further from the community.
The ability of fewer farmers to absorb higher percentages of farmland ownership becomes a difficult balancing act. Purchasing farmland is a hit on cash flow and/or cash reserves since farmland does not pay for itself in the short run.
We talk about the ability to “digest” a land purchase. Those with extensive equity generating strong cash flow may digest a purchase quickly while others may be off the prospect list for years to come. Each neighborhood has its own influences in this regard. The flip side is that more land will transition to farmer ownership through generational change, as well, strengthening balance sheets and enhancing cash flows. This is a fascinating topic which deserves continual attention.
