Farmland is popular – and for many good reasons. Not only is it a source of income for those who farm it, it can also be a successful source of income for landowners who do not farm it themselves and may lease it to tenant farmers.
Other owners of farmland see their ownership of top tier farmland, like that which we see in Iowa, as a long-term investment more than a short-term source of income. Sure, excellent quality farmland can be both, but for many investors, it’s the long-term payoff that is appealing.
But understanding that appeal can be incredibly useful no matter where you fall on the matter – whether it be selling farmland or buying farmland. That’s why it’s a good idea to keep an eye on who is selling land and who is currently buying land.
Having a sense of this supply and demand can be helpful for future planning, especially when you might find yourself in a position to either buy or sell land yourself.
Why Invest in Farmland?
No matter your position, buyer or seller, it’s helpful to know why many investors are seeking to purchase farmland in the current market.
First, it’s helpful to note that farmland is not an infinite resource. Currently, there are about 911 million acres of farmland in the U.S. According to the Motley Fool, farmers and ranchers make up ownership of about 61% of that land and the rest of the land is rented from third party landlords.
The rest of the land in the country is owned by a combination of retired farmers, investors groups, individuals, corporations, trusts and other owners.
For the owners who are holding onto farmland as an investment rather than an immediate source of income, the reasons are pretty clear.
First, the increases in farmland values over the years have suggested that they will likely continue to rise and eventually be worth much more in the future. This means that these investors who are buying now may be able to achieve a higher return on investment when they do decide to sell down the road.
Add in the factor that these investors can count on that future payoff with the fact that current crop yields and cash yield payments can provide an immediate income, and the value of farmland for investors starts to make immediate sense.
What About Iowa Farmland?
But let’s zoom into what farmland is doing locally. In Iowa, an excellent indicator of how farmland values and sales are holding up is the Iowa State University Land Value Survey.
Completed several times throughout the year, the survey gives a general sense of how much farmland is selling for in each region of the state, who is typically buying and who is typically selling land.
Add to this information about what factors may be influencing land values and buying and selling decisions, and you have an excellent resource for informing your own decision about what to do with your own farmland.
What are Farmland Values in Iowa?
So, let’s start with the obvious first question many might have: What are the current land prices for farmland in Iowa?
According to the final 2022 ISU Land Value Survey, the average value of an acre of Iowa farmland increased 17 percent to $11,411 per acre. Reasons for this increase include commodity prices, the limited land supply available and the low interest rates that lasted through summer 2022.
But Who is Buying Farmland in Iowa?
With prices as high as they are, it begs the question: who is still buying farmland in Iowa?
According to results from the final 2022 survey, buyers fell into six different categories:
- Existing local farmers
- Existing relocating farmers
- New farmers
- Local investors
- Non-local investors
- Other
Most of last year’s sales, 68 percent to be exact, went to existing farmers with 66 percent being local and 2 percent being relocating. New farmers accounted for 4 percent of sales and investors 27 percent. For investors, 14 percent were local and 13 percent were not local, according to ISU’s survey.
Who is Selling Farmland in Iowa?
The next question, then, becomes who are the folks who are selling the farmland and capitalizing on these great prices.
According to the survey, sellers fell into six categories:
- Active farmers
- Retired farmers
- Estate sales
- Local investors
- Non-local investors
- Other
Most of the farm sales from 2022 were from estate sales (57 percent), while retired farmers followed in the second most common category (21 percent). Active farmers accounted for 8 percent, while both categories of investors combined accounted for 6 percent of sellers.
What Does this Mean for those Looking to Sell or Buy Farmland?
While the survey itself dives into much greater detail as to what recent buying and selling results may mean, in general, it focuses on a 17 percent increase to $11,411 per acre for the average price of Iowa farmland value from November 2021 to November 2022.
This increase is supported by several factors, which have already been mentioned, but include high commodity prices, limited land supply, past low interest rates, readily available cash and others.
In short, though, the limited supply of land available for sale – and perhaps the financial returns that land can provide in both the short and long term – are reasons for why land is still a hot commodity in Iowa.
If you’re a buyer, then that likely means you should expect some competition for the land you are after. As for sellers, it’s still your market – and your chance to make the most of it.
Stalcup Can Help Provide Direction
No matter what end of the farm real estate transaction you find yourself on, Stalcup AgService is here to help.
There are very few farm real estate companies that can match Stalcup’s agriculture background and ability to navigate today’s market in Northwest Iowa.
With our daily farm management activities, we have firsthand knowledge of what producers are experiencing in any given area of our covered territory.
You can view current real estate information, such as our recent farm auctions, properties for sale and recent farm sale results, to see our track record.
Contact us and we can help you with your farm real estate needs.
