Farmland closed out another strong year in 2022 with land prices growing again with the general farm economy in a healthy enough condition to still support sky-high demand with buyers still willing to pay those prices.
Here in Iowa, there are several sources of information regarding farmland that those working in agriculture keep close tabs on, including the Iowa State University Farmland Value Survey.
The final edition of the 2022 survey was released just last month. The survey, which asks for responses from licensed real estate brokers, farm managers, appraisers, agricultural lenders, county assessors and others, contains plenty of valuable information for anyone interested in farmland values. The information is especially useful for those with specific interests in farm real estate and buying and selling farmland.
Here is what the data from the 2022 survey can tell us about what to expect and what you should know about Iowa land prices in 2023.
What is the Price of Farmland in Iowa?
Land values have been on a hot streak in recent years. Last year was no different.
On average, the price of Iowa farmland was $11,411 per acre in November 2022. That’s an increase of 17% when compared to November 2021.
Here in Northwest Iowa, where the high-quality of our land is well-known, values were even higher. In November 2022, the average value per acre of farmland in our region was $14,878, up a considerable 22.3% compared to November 2021. That is almost $3,000 more than the next-highest region, East Central Iowa, which had a reported average value of $12,595 per acre (up 14% from last year).
Why are Farm Values High?
Survey respondents gave several positive factors that are helping land values increase. While you can read the survey yourself to find all of the reasons listed there were three reasons given that rose to the top that should be noted:
- High commodity prices
- Demand due to limited land supply
- Low interest rates during the summer
As you can see, these reasons for high prices are also contributing significantly to buyers being able to still purchase farmland. In fact, more than half of the survey’s respondents indicated that there were more land sales in 2022 than 2021.
Who is Buying Farmland in Iowa?
When it comes to farmland, there are typically several common types of buyers and owners.
In the U.S. most people who own farmland are the individuals farming the land themselves, according to the USDA Economic Research Service. Other owners include farmers who lease the land to tenant farmers and individuals who are non-operators, which can include any individual, a group of people, corporations, trusts or some other type of owner.
Iowa State University’s Land Survey results show that, in Iowa at least, there were six categories of buyers, all of which fit into the general landowner categories listed above. Buyers last year were one of the following:
- Existing local farmers
- Existing relocating farmers
- New farmers
- Local investors
- Non-local investors
Most land sales (68%) last year went to existing farmers. Of those farmers, 66% were already located in the same area as the land they purchased. New farmers were the buyers in 4% of sales, while existing relocating farmers were 2%.
As a whole, investors were the next largest buyer group at 27%. Of sales that went to investors, 14% went to local investors, while 13% of sales went to investors who were not local to the area.
Will Land Prices Remain this High in 2023?
Based on results from the survey, it’s safe to say most people believe farm values will remain high and that, overall, the farmland market will stay healthy for the next several years. Many respondents believe values may continue to see increases well within the range of, or even exceeding, those of recent years.
One interesting takeaway, however, is that 59% and 12% of respondents stated that they believe current land values are either “too high” or “way too high.”
How to Prepare to Buy Farmland
Buying farmland with values at such high rates may seem daunting, and that is all the more understandable for new farmers who are just starting out or have not been farming for very long. High prices are often cited as one of the largest hurdles between farmers
Still, no matter the experience level, buying farmland is a choice that needs to be carefully evaluated.
According to Successful Farming, there are several things a prospective land buyer can and should do to acquire land.
Chief among those tips is to consider your professional and personal goals. If you are looking to invest, then buying may make sense as land is limited in supply and normally outpaces other forms of investment. Farmers interested in handling operations and making money in the short-term may be better off renting.
Anyone who may be in the farmland market should also keep an eye out for auctions – and not just in their local area. Auctions can be a good way to not only buy land, but also see how competitive a certain market may be.
Stalcup AgService Understands Buying Farmland
Whether you are a farmer or looking to be a non-operator landowner, Stalcup AgService can help you navigate the farmland market, especially here in Northwest Iowa where our team’s experience and expertise are unmatched.
Our farm managers understand Northwest Iowa and its land market through and through. On top of our real estate experience, we are also the same professionals that buyers we work with choose to manage their farms.
With that in mind, you can trust that Stalcup AgService will deliver favorable results when you are looking to buy farmland. After all, we may end up being the ones who must manage the operation and deliver even more results down the road.
If you are ready to learn more about our services, or simply want to know more about how to start the land buying process, then do not hesitate to contact us today.
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