Iowa Appraisal and Research Corp

Iowa Land Auction Prices, December 23-29, 2016

Posted on 12/30/2016 at 11:00 AM by Jim Rothermich

Greetings!  This past week was pretty slow for land auctions in Iowa due to the Christmas and New Year’s holiday with only two land auctions.  There were a total of 292 acres offered at auction, of those acres, there were 253 tillable acres.  There was not enough land sold to really test the market but the two auctions that did occur were lower quality farms and, in my opinion, appear to have sold good.  Here are the highlights:

  • 141 acres sold in Crawford County in two tracts:
    • Tract 1- 39 acres- $6,000/acre- 39 tillable acres- CSR2- 87.0 (Boyer River Bottom Tract)
    • Tract 2 101 acres- $3,750/acre- 78 tillable acres- CSR2- 57.0 (upland tract)
  • 151 acres sold in Crawford County- $5,500/acre- 136 tillable acres- CSR2- 65.0 (upland tract)

As 2016 goes into the record books, I want to bring up a few things for you to think about regarding the Iowa land market going into 2017:

  • Record yields this fall and better than expected grain prices, especially soybeans, kept the market very stable.  There were a lot of people predicting declines in land prices this spring & summer and it just did not happen.
  • Low supply of land for sale and a lot of pent up demand to buy land kept land prices stable. (There are only a little over 1 farm for sale in each county in Iowa over 85% tillable).
  • Low interest rates were also a factor with no better alternative investment.  However, since the election on November 8, interest rates on many financial instruments have increased.  Interest rates since November 8 likely are not large enough to put much downward pressure on farmland prices.  There are two reasons why rising interest rates put downward pressure on land prices.  First, increases in financing cost making it more expensive to debt finance land.  Second, rising interest rates signals higher returns on alternative investments, thereby making alternative investments more attractive than farmland. 
  • Farm incomes will likely continue to decline next year with grain prices remaining at or near their lowest levels in about a decade.  In the last three years, U.S. production has outpaced usage for corn and soybeans.  Abundant inventories of corn & soybeans mean low prices. 
  • Crop production profitability is and will always be the primary force behind land prices.  Low, even negative, profitability is expected next year and will keep downward pressure on land prices. 
  • Land prices are still higher than they were the last time grain prices were at current levels.  (Considerably higher!)
  • If you want to stay current on what is happening with Iowa land prices and would rather have factual information than a survey, check my weekly blog week.

“That’s my story and I’m sticking to it!”

Jim “the Land Talker”

@TheLandTalker
Monthly Iowa land auction results email:  Click here to subscribe.

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