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2017 IOWA STATE UNIVERSITY LAND VALUE SURVEY: OVERVIEW

History and Purpose of the ISU Land Value Survey

The survey was initiated in 1941 and is sponsored annually by Iowa State University. Only the state average and the district averages are based directly on ISU survey data. County estimates are derived using a procedure that combines ISU survey results with data from the US Census of Agriculture. Since 2014, the survey has been conducted by the Center for Agricultural and Rural Development in the Department of Economics at Iowa State University and Iowa State University Extension and Outreach. The survey is intended to provide information on general land value trends, geographical land price relationships, and factors influencing the Iowa land market. The survey is not intended to provide a direct estimate for any particular piece of property. The survey is an expert opinion survey based on reports by licensed real estate brokers, farm managers, appraisers, agricultural lenders, county assessors, and selected individuals considered to be knowledgeable of land market conditions. Respondents were asked to report for more than one county if they were knowledgeable about the land markets. The 2017 survey is based on 877 usable county-level land values estimates provided by 710 agricultural professionals. Of the 710 respondents, 64 percent completed the survey online. Online responses allow participants to provide estimates for up to 15 counties. A new web portal has been developed this year to facilitate the visualization and analysis of Iowa farmland values by pooling data from ISU, USDA, Chicago Fed, and the Realtor Land Institute, as well as by making use of charts over time and interactive county maps. The portal can be accessed at https://www.card.iastate.edu/farmland. Participants in the survey are asked to estimate the value of high-, medium-, and low- quality land in their county. Comparative sales and other factors are taken into account by the respondents in making these value estimates. This survey is the only data source that provides an annual land value estimate at the county level for each of the 99 counties in Iowa. In addition, this survey provides estimates of high-, medium-, and low-quality land at the crop reporting districts and state level.

Analysis by State

The 2017 state average for all quality of land was estimated to be $7,326 per acre as of November 2017. The state value increased $143 per acre from November 2016. The percentage increase was 2.0 percent from November 2016, which was the first increase after three consecutive years of decline.

December 11, 2017

Prepared by Dr. Wendong Zhang (515-294-2536, wdzhang@iastate.edu), assistant professor of Economics and extension economist at Iowa State University, Karen Kovarik, CARD staff, Mykayla Getschel, Morgan Ruiz and Philip Sciranko, undergraduate research assistants.

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Analysis by Crop Reporting District The highest average land values were reported for Northwest Iowa, $9,388 per acre. The lowest average land values were estimated for South Central Iowa, $4,172 per acre. Seven of nine crop reporting districts reported an increase in land values: the largest percentage increase was in East Central Iowa, 3.8 percent, only the South Central district reported a loss, 1.6 percent lower than 2016. The Southwest district reported no notable changes in value. Low-quality land in Central, Southwest, South Central and Southeast Iowa all saw declines despite increases in other districts.

Analysis by Counties The highest value was estimated for Scott County, $10,497 per acre. The lowest value was in Decatur County, $3,480 per acre. Only four of 99 counties in Iowa reported a drop in land value. The largest percentage increase, 4.7 percent, was reported in both Allamakee and Clayton Counties. The largest dollar decrease was reported Mills County, $25 per acre. The highest percentage decrease (0.3 percent) was reported in Fremont, Mills, Montgomery, and Page Counties.

Analysis by Quality of Land Low-quality land in the state averaged $4,689 per acre and showed a 0.5 percent increase or $24 per acre. Low-quality land in the Central, Southwest, South Central, and Southeast districts all saw declines, despite increases in other districts. Medium-quality land averaged $6,849 per acre and showed a 2.2 percent increase or $144 per acre. High-quality land averaged $8,933 per acre and showed an increase of 2.0 percent or $175 per acre.

Major Factors Influencing the Farmland Market Most survey respondents listed positive and/or negative factors influencing the land market. Of these respondents, 80 percent listed at least one positive factor, and 81 percent listed at least one negative factor. In most cases, respondents listed multiple factors. There were three positive factors listed by over 10 percent of respondents who provided at least one positive factor. The most frequently mentioned factor was low interest rates, mentioned by 21 percent of the respondents. Limited land supply was the second-most frequently mentioned positive factor, mentioned by 20 percent of the respondents. Other frequently mentioned positive factors included strong yields (15 percent), strong demand (6 percent), and investor demand (5 percent). There was only one negative factor listed by more than 10 percent of respondents who identified at least one negative factor. The most frequently mentioned negative factor affecting land values was lower commodity prices, mentioned by 41 percent of respondents. High input prices and eroding cash and credit availability were the second-most frequently mentioned negative factors, with each mentioned by 7 percent of respondents. Strong investment alternatives such as the stock market, an uncertain agricultural future, and weaker cash rents were mentioned by 6, 5, and 4 percent of the respondents, respectively.

Number of Sales Compared to Previous Year Forty percent of respondents reported lower sales in 2017 relative to a year ago. On the other end of the spectrum, just 20 percent reported more sales, and 37 percent reported the same level

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of sales in 2017 relative to 2016. Central Iowa has the highest percentage of respondents who reported lower sales, 63 percent, while the Southeast and Northwest districts have the lowest percentage of respondents who reported lower sales, 31 percent each.

Land Sales by Buyer Category The 2017 survey asked respondents what percent of the land was sold to five categories of buyers: existing local farmers, existing relocating farmers, new farmers, investors, or other. The majority of farmland sales, 72 percent, were to existing farmers, of which existing local farmers capture 70 percent of land sales and only 2 percent were to existing relocating farmers. Investors represented 22 percent of land sales. New farmers represented 4 percent of sales, and other purchasers were 2 percent of sales. Sales to existing local farmers by crop reporting districts ranged from 81 percent in Northwest Iowa to 52 percent in South Central Iowa. Sales to investors were highest in South Central Iowa (34 percent). Northwest Iowa reported the lowest investor activity (15 percent).

Land Sales by Seller Category The 2017 survey asked respondents what percent of land was bought from five categories of sellers: active farmers, retired farmers, estate sales, investors, or other. The majority of farmland sales, 54 percent, were from estate sales, followed by retired farmers at 23 percent. Active farmers account for 13 percent of sales, while investors accounted for 8 percent. Estate sales by crop reporting districts ranged from 64 percent in Northwest Iowa to 33 percent in South Central Iowa. Sales by investors were highest in South Central Iowa (19 percent). Northwest Iowa reported the lowest investor sale activity (5 percent).

Respondents by Occupation and by Mode of Survey The 2017 ISU survey also asked the main occupation of the respondent: farm managers, appraisers, agricultural lenders, brokers/realtors, government, farmers/landowners, and other. This year’s survey also asked about the number of years’ experience of respondents and number of counties they offer services in. Additionally, the land value survey was available online in addition to using the traditional mail copy. In total, 710 agricultural professional completed the survey, providing 877 county land value estimates, which is a historic high. Of these 710 respondents, agricultural lenders represented the largest group, accounting for 42 percent of all respondents. Realtors/brokers, farm managers, and appraisers were the other three largest groups, representing 14, 13, and 9 percent of respondents, respectively. Of all respondents, the percentage of agricultural lenders ranged from 39 percent in South Central to 52 percent in the Northeast district. Agricultural professionals on average have 25 years of experience in their current profession and offer professional service to an average of 9 counties. While government officials typically only serve two counties at most, farm managers, appraisers, ag lenders, and realtors/brokers offer services to 10, 13, 5, and 14 counties, respectively. The survey was completed online by 454 participants—64 percent of the 710 respondents in

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total. Eighty-five percent of the respondents only provided land value estimates for their primary county, and 9 and 3 percent of these 710 respondents provided estimates for 2 and 3 counties, respectively.

Farmland Value and Cash Crop Price Predictions by Respondents This year’s survey asked respondents to predict land values and cash crop prices one and five years from now. The 2.0 percent increase boosted confidence in the strength of the farmland market despite growing farm financial stress, especially in the medium term. Fifty-eight percent of respondents forecasted an increase in their local land market a year later, while 25 percent expected a lower land value, and 18 percent forecasted no change a year later. Looking five years ahead, a vast majority of the respondents (83 percent) expect a higher land value than current levels, with only 13 percent forecasting a decline. Respondents expect a slow but steady improvement in the cash crop markets, both corn and soybean. In particular, the predicted state average cash corn prices for November 2018 and 2022 (five years from now) are $3.32/bu and $3.98/bu, respectively. The predicted state average soybean price predictions are $9.21/bu one year later, and $10.25/bu five years later.

Land Quality and Corn Suitability Rating 2 To gauge how each respondent defined high-, medium-, and low-quality land for their county, we asked for estimated average CSR2 (Corn Suitability Rating 2) for high-, medium-, and low-quality land. We also asked their estimates for the percent of land area for each land quality class. Results show that agricultural professionals have adapted to CSR2. Approximately 90 percent of participants provided at least one CSR2 estimate for the corresponding land quality classes. The estimated average CSR2 statewide for high-, medium-, and low- quality land is 82, 70, and 56 points respectively, and the reported estimated percent of land area for high-, medium-, and low- quality land is 36, 41, and 23 percent, respectively. In addition, respondents ranked high-, medium-, and low-quality land based on relative conditions in their region. For example, the average CSR2 for high-quality land in the South Central district is 70, comparable to the CSR2 for low-quality land in Northwest district at 67.

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Interpretation of the Survey Results The 2017 Iowa State University land value survey reported a 2.0 percent increase to $7,326 in average Iowa farmland values from November 2016 to November 2017. This represents the first, albeit modest, increase in the Iowa farmland market after three consecutive years of decline from 2013 to 2016; however, this does not necessarily indicate a turn of the land market. Actually, the inflation-adjusted average farmland value actually saw a 0.2 percent drop since a year ago. Given rising interest rates and stagnant farm income, the continued decline in values in the foreseeable future is still likely. This could be just a temporary break in a downward adjustment trajectory. This recent increase is largely driven by limited land supply: only 20 percent of respondents reported more sale activities in their primary county, and this marks the first time in the past 20 years that more respondents reported four years in a row of less sale activities than in each previous year. Specifically, 43 percent of survey respondents reported lower sales in 2017 relative to 2016, compared to 20 percent reporting more sales, and 37 percent reporting similar/no change in sales. In addition to limited land supply, favorable interest rates and strong crop yields were reported across the state, except for South Central and Southeast Iowa. In general, the results from the 2017 Iowa State University land value survey echo results from other surveys. In November, 2017 the Federal Reserve Bank of Chicago reported no change in Iowa‘s “good” farmland values from July 1st, 2017 to October 1st, 2017, which represents a 2% increase from October 1st, 2016 to October 1st, 2017. Specifically, the Northeast and Western districts saw a 1% increase over the last quarter, while the Central district saw a 1% decrease in land value from July to October 2017. The Eastern district saw no change in values. U.S. Department of Agriculture June Area Survey reported a 1.9% increase in Iowa‘s agricultural real estate values (land and building) from June 2016 to June 2017. In September, the Realtors Land Institute reported a 2% increase in Iowa cropland values from March 2017 to September 2017, which constitutes a 2.9% decline from September 2016 to September 2017. The 2017 ISU survey shows that seven of nine crop reporting districts reported an increase in land values: the largest percentage increase was in East Central Iowa, 3.8 percent, which likely is a result of stronger yields this year—the East Central and Northeast districts are the only two districts that saw an increase in corn yields over 2016 levels. In contrast, the South Central district reported a loss, 1.6 percent lower than 2016, which could in part result from a 5 percent lower payment rate from the Conservation Reserve Program (CRP) from a year ago. The Southwest district reported no notable changes in value. Additionally, only four of 99 counties in Iowa reported a drop in land value—Fremont, Mills, Montgomery, and Page Counties all saw a 0.3 percent decline. This year’s survey revealed different patterns in land values across different land quality classes. While state average values for high- and medium-quality land both increased about 2 percent, there was only a 0.5 percent increase for low-quality farmland values. In addition, low-quality land in the Central, Southwest, Southeast, and South Central districts all saw a decline compared to a year ago, ranging from 0.4 percent to 6.1 percent. This, in part, results from a lower CRP rental rate for those lower-quality land parcels eligible for CRP in 82 out of 99 Iowa counties compared to a year ago. The survey also reported on buyers and sellers of Iowa farmland. The majority of farmland sales, 71 percent, were to existing farmers, with existing local farmers making up 70 percent of sales. Investors and new farmers represented 23 and 4 percent of sales, respectively. In contrast, estate sales accounted for 54 percent of farmland sales, and retired farmers accounted for 23 percent of sales. Additionally, the most common positive factors influencing land prices noted by survey respondents were low interest rates, limited land supply, strong crop yields, and strong demand. The most commonly cited negative influences were lower commodity prices, high input prices, weak cash rental rates, and stronger investment alternatives such as stock market returns. The farmland value estimates from the ISU Land Value Survey is average land value estimates for all farmland in the county, which not only includes cropland, but also pasture, CRP, and timberland. Specifically, we ask the respondents “farmland value for average-sized farms in your county as of

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November 1, 2017.” It is important to note that when comparing results across surveys for Iowa and neighboring states, it is better to compare percentage change over time as opposed to dollar amount per acre. The Iowa State University survey is an opinion survey, as are the surveys conducted by Federal Reserve Bank, USDA, and the Realtor Land Institute. There are four major distinctions between the ISU survey and other surveys of Iowa farmland markets conducted by the USDA, Federal Reserve, and RLI. First, the respondents are different: the USDA survey is a producer opinion survey; the ISU survey relies on farm managers, appraisers, brokers and agricultural lenders; the RLI survey relies mainly on farm managers, appraisers, and brokers; the Federal Reserve survey relies on bank presidents and agricultural lenders; and, the USDA survey relies on estimates by individual agricultural producers. Second, the land value definitions are different—USDA asks farmers to estimate the current market value of the parcel that he or she operates, the ISU survey asks for the typical farmland value for average-sized farms in a particular county, and RLI breaks down land value by high-, medium-, and low-quality tillable cropland, pasture, and timberland. Third, the spatial coverage of the survey is different: ISU provides an annual land value estimate at the county level, RLI is at the crop reporting district level, and USDA and Federal Reserve are typically at the state level. USDA Census of Agriculture does also provide a county-level estimate, but that is only conducted every five years. Fourth, the timing of the survey is different: ISU land value estimates are as of November 1, the USDA survey is released every August for value as of June, RLI estimates are released every March and September, and Federal Reserve estimates are released in January, April, July, and October. An opinion survey is just that. It represents the collective opinion of the survey respondents. Most of the respondents will use actual sales to formulate their opinions but each person can choose to weigh or discount particular sales as they deem necessary. In addition to farmland transactions, opinion-based surveys often provide consistent and complimentary information on farmland market trends at the county, district, and state level. A study led by Dr. Mike Duffy comparing the ISU land value survey and actual sales data in Iowa from 2000 to 2011 showed that differences were not statistically significant. Land value surveys provide a good indication of the direction of change and level of value, but they are still an opinion survey that represents who is being surveyed. It is important to consider the survey respondents, the questions asked, the time period covered, and other factors relating to a particular survey. The ISU land value survey is intended to provide information on general land value trends and geographical land price relationships and factors influencing the Iowa land market. The survey is not intended to provide a direct estimate for any particular piece of property. We recommend the interested buyer or seller hire an appraiser to conduct formal appraisal of particular parcel, go to county assessor websites, or examine recent auction results for comparable parcels in their region.

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Outlook for Land Values After three consecutive declines since its 2013 peak, the average land value for all qualities of farmland saw its first increase. The estimated $7,326 per acre statewide average for all qualities of land represents a 2.0 percent increase from November 2016. To many, this recent 2.0 percent indicates a turnaround of the farmland market—58 percent of the respondents to the 2017 ISU survey expected another hike in their counties’ land value a year from now. However, as opposed to a result of improving farm income, this recent increase in land market is mainly driven by limited land supply. Given the rising interest rate and heightening farm financial stress across the Midwest, this recent bump could likely be just a temporary break in a continued downward adjustment in the farmland market. Many supply and demand factors were behind this recent increase in the land market. First, the farmland market has always been a thin market with less farmland sales, but the past four years the farmland market has been extremely tight: for four consecutive years, more respondents to the ISU survey reported less sales in their county compared to the previous year. In this year’s survey, only 20 percent of the respondents reported more sales activities, while 44 and 37 percent reported less or similar sales activity, respectively. The limited farmland supply helped buoy market prices in many areas across the state. Second, the U.S. Department of Agriculture Economic Research Service forecasted that U.S. farm sector profits are relatively stable in 2017 after 3 consecutive years of decline: U.S. net farm income is forecast to increase $1.7 billion (2.7 percent) from 2016 to $63.2 billion in 2017 and net cash income is forecast to increase $3.7 billion (3.9 percent) to $96.9 billion. Third, the 2017 Iowa State University Cost of Production estimates revealed that the estimated average cost for corn production in Iowa dipped by 12 percent to $3.51/bushel for corn following soybean production, and the average cost for soybean dropped by 9 percent to $9.56 for herbicide resistant soybeans. Despite continued declines in commodity prices, the corresponding drop in production costs have resulted in breakeven or positive production margin for many producers this year, which has a positive impact on farm income and asset values. The 2.0 percent increase boosted confidence of our respondents in the perceived strength of the farmland market despite growing farm financial stress, especially in the medium term. Fifty-eight percent of the respondents to our 2017 ISU survey forecasted an increase in their local land market a year later, while 25 percent expected a lower land value, and 18 percent forecasted no change a year later. Looking at the land market five years from now, a vast majority of respondents (83 percent) expect a higher land value than current levels, with only 13 percent forecasting a decline. This is consistent with their corn and soybean price forecast, which is a slow but steady improvement in the cash crop markets, both corn and soybean. The farm managers and rural appraisers at the May 2017 90th annual Soil Management and Land Valuation conference also expected a stabilization in Iowa‘s farmland market in late 2017 throughout 2018, but it may rebound a bit in the medium run before 2020. I would caution any immediate hail of the turn of the Iowa farmland market given the stagnant farm income and rising interest rates. The fundamentals of the U.S. farm economy haven’t improved significantly, so this recent increase in land value to some extent is defying logic. There are several reasons for my caution. First, despite the 2.0 percent increase in nominal average state land values, the inflation-adjusted Iowa farmland value on average actually saw a 0.2 percent decline. In other words, the growth in general inflation in the U.S. economy actually outpaced the seeming gain in the farmland market. Second, the recent increase is largely influenced by very limited farmland supply, so if more farmers are forced to liquidate a portion of their assets due to heightening farm financial stress, there will be more land parcels available on the market, potentially allowing the land market to go down in the future. An analysis by Dr. Alejandro Plastina using farm data from the Iowa Farm Business Association shows that the share of financially stressed farms (vulnerable liquidity or solvency ratings) increased from 38 percent in December 2014 to 47 percent in December 2016. The Federal Reserve Banks in Chicago and Kansas City also reported continued deterioration in agricultural credit conditions, as a result, the downward pressures on the farmland market are still present. Finally, many neighboring states, from Kansas and Nebraska to Illinois and Indiana, all saw a modest decline in their land market compared to a year ago, according the surveys conducted

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by the Federal Reserve Banks of Chicago and Kansas City. There is no explicit reason to believe that Iowa’s land market has a fundamentally different dynamics than those of neighboring states, especially Illinois and Indiana. Actually, the Ag Economy Barometer, a nationwide producer survey conducted by Purdue University, reported that more producers expected to see a lower land value in their area as opposed to a higher land value. Put simply, land value is the net present value of all discounted future income flows. With certain assumptions imposed, one could think of land value being net income divided by interest (discount) rate. To understand the changes in land value over time and across space, it is useful to examine how net income and interest rates will change over the next few years. In particular, trends in net income for a particular region will be reflected in the farmland market, which tends to be localized. With the boost of strong yields, the prospect for the agricultural economy is showing signs of stabilization after four consecutive years of declines. USDA Economic Research Service forecasted in August 2017 that U.S. net farm income will rise 2.7 percent in 2017. However, the USDA Office of Chief Economist long-term forecast to 2026 expected a slow improvement in farm income as opposed to a sudden rebound. In other words, in the immediate future, we are likely to see stagnation in the net farm income and farm sector profits, which is prone to shocks of NAFTA renegotiations and implies a stagnant land market in the near future. In addition, even with the shift in its leadership, the Federal Reserve Bank will likely continue its efforts to raise the interest rates. Over the past two years, the Federal Reserve Bank has made three hikes, each 25 basis points, to the short-term federal funds rate to over 1 percent. The agricultural lenders have responded to raise the fixed and variable agricultural loans rates to its highest level in five years at more than 5.5 percent. This trend will likely continue especially in light of the growing agricultural debt repayment problems experienced at some agricultural banks. With stagnant future farm income and a highly probable increase in interest rates, we might see farmland values continue to recede due to stagnant commodity prices, new uncertainty regarding agricultural trade such as NAFTA renegotiations, and possible stress sales from some producers. Despite the recent increase driven by limited land supply, the economic fundamentals suggest that the Iowa farmland market appears to have peaked for the foreseeable future, and we may expect to see it drifting sideways. In other words, it seems that current farmland market hasn’t fully capitalized the reduction of net farm income off its 2013 peak yet. U.S. crop agriculture continues on an amazing productivity run. The last five corn crops were the five largest ever produced, and the last four soybean crops were the four largest ever. This run is the result of a combination of improved seed genetics and mostly favorable weather conditions, and it is likely to continue into the next season. While these phenomenal yields help drive the per bushel production cost down, the abundant supply resulting from record yields also often leads to even lower commodity prices. Although current futures prices for the 2018 crops are offering a somewhat better outlook with the 2018/19 season average corn and soybean price around $3.80 and $9.90 per bushel, respectively, projections for the 2018/19 crop margins would be slightly below breakeven for both crops because of current wide basis levels. The likely high yields for next production season will exacerbate the oversupply of corn and soybean and thus keep the prices at low levels. This low-to-negative crop production margin likely will put additional downward pressure on the land market. Similarly, both the hog and cattle prices were stable compared to year ago, but about 20 percent lower than two years ago, and the effects of strong livestock profits compensating crop profit loss are much weaker. Farmland sale activities tend to be correlated with changes in land values—with the current farm downturn, landowners tend to continue to hold to land parcels and postpone their land sales, which results in a continuation of less farmland sales. With the continued decline in farm income and profitability, some existing landowners may reconsider retirement and sell their land eventually. The heightening farm financial stress is already putting pressure on some vulnerable producers to liquidate some of their assets. To the extent that this will lead to more land parcels on the market, which is not much given the current tight market, there could be additional downward pressure on

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the farmland market. According to the 2012 Iowa Farmland Ownership and Tenure Survey, half of Iowa’s farmland has been held for more than 20 years. As a result, a large influx of farmland supply is not likely, but this potential rise in farmland sale activity and continued decline in farmland values might present opportunities for beginning farmers and ranchers to enter the market. Farmland has historically been a fairly robust investment that generates relatively stable returns. Since 1941 the nominal and inflation-adjusted Iowa farmland values have averaged a 6.5 percent and 2.7 percent increase per year, respectively. Farmland values have increased 73 percent of the years, decreased 26 percent of the years, and remained unchanged for three years between 1910 and 2017. While 20 percent of Iowa farmland is mainly owned for family or sentimental reasons, the strong robust returns have and will continue to attract interested farmers and investors to invest in the farmland market. There are several unique uncertainties worth watching over the next year or two. First, it remains unclear how quickly and by how much the Fed will raise interest rates. Second, it is uncertain how the trade agreement renegotiations like NAFTA will affect agricultural exports and farm income. This is particularly relevant for Iowa as it is one of the few states that have a trade surplus with Mexico, and disruptions of NAFTA could have major negative implications for the Midwest agricultural economy. Third, the agricultural sector is closely watching possible policy changes, especially the 2018 Farm Bill discussions and the impacts of new tax reform. Fourth, it is critical to watch whether the improved farm income and land market lead to landowners’ growing interest in selling land, or more stressed sales from financially stressed producers. If we define a “golden era” in agriculture as a period when the inflation-adjusted value of farmland significantly exceeds the 1910 level, we can argue that there have been three major golden eras in modern U.S. agriculture over the last 100 years: 1910–1920, 1973–1981, and most recently, 2003–2013. With current commodity prices and U.S. farm income and asset values declining significantly, many farmers and agricultural professionals worry about the current farm downturn deteriorating into another farm crisis. However, I would argue that despite the growing financial stress across the Midwest over the past few years, we are unlikely to see a replay of 1980s farm crisis as evidenced by the sudden, precipitous collapse of the U.S. agricultural land market and mounting delinquent farm loans and foreclosures. This somewhat optimistic outlook mainly stems from the strong farm income growth from 2003 to 2013, the historically low interest rate environment, and more prudent agricultural lending practices. In addition, our analysis suggests that the trajectory of the current farm downturn will likely be a gradual, drawn-out one like that of the 1920s farm crisis, as opposed to a sudden collapse as in the 1980s farm crisis. Across the Midwest, there are signs of deteriorating agricultural credit conditions and a continued, prolonged downturn in the agricultural economy, although with a much slower pace. Given the rising interest rates and stagnant farm income, I would not be surprised to see a continued decline in values in the future. This recent bump of Iowa farmland market, to me, seems more like a temporary break in a downward adjustment trajectory.

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Table 1. Recent Changes in Iowa Farmland Values 1971–2017 Value

Per Acre Dollar

Change %

Change Value

Per Acre Dollar

Change %

Change

1971 430 11 2.6 1995 1455 99 7.31972 482 52 12.1 1996 1682 227 15.61973 635 153 31.7 1997 1837 155 9.21974 834 199 31.3 1998 1801 -36 -2.01975 1095 261 31.3 1999 1781 -20 -1.11976 1368 273 24.9 2000 1857 76 4.31977 1450 82 6.0 2001 1926 69 3.71978 1646 196 13.5 2002 2083 157 8.21979 1958 312 19.0 2003 2275 192 9.21980 2066 108 5.5 2004 2629 354 15.61981 2147 81 3.9 2005 2914 285 10.81982 1801 -346 -16.1 2006 3204 290 10.01983 1691 -110 - 6.1 2007 3908 704 22.01984 1357 -334 -19.8 2008 4468 560 14.31985 948 -409 -30.1 2009 4371 -97 -2.21986 787 -161 -17.0 2010 5064 693 15.91987 875 88 11.2 2011 6708 1644 32.51988 1054 179 20.5 2012 8296 1588 23.71989 1139 85 8.1 2013 8716 420 5.11990 1214 75 6.6 2014 7943 -773 -8.91991 1219 5 .4 2015 7633 -310 -3.91992 1249 30 2.5 2016 7183 -450 -5.91993 1275 26 2.1 2017 7326 143 2.01994 1356 81 6.4

Table 2. Iowa Farmland Values and Percentage Change by District and by Land Quality as of November 2017

District Average

Value %

Change High

Quality %

Change Medium Quality

% Change

Low Quality

% Change

Northwest $9,388 1.6% $10,829 1.7% $8,555 1.0% $6,216 3.3% North Central $7,802 3.2% $8,730 3.4% $7,218 3.2% $5,265 2.0% Northeast $7,543 3.1% $9,151 2.9% $7,236 3.5% $4,965 2.4% West Central $7,377 0.3% $8,881 0.1% $6,824 -0.7% $4,684 2.3% Central $8,097 3.3% $9,568 2.9% $7,426 3.3% $4,993 -3.2% East Central $8,218 3.8% $9,900 4.2% $7,674 3.8% $5,305 3.0% Southwest $6,058 0.0% $7,571 0.6% $5,756 1.3% $3,935 -6.1% South Central $4,172 -1.6% $5,908 -1.2% $4,079 -1.2% $2,824 -2.3% Southeast $6,864 2.2% $9,471 2.2% $6,548 4.2% $3,768 -0.4% STATE (avg) $7,326 2.0% $8,933 2.0% $6,849 2.2% $4,689 0.5%

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Table 3. Iowa Farmland Values by Crop Reporting Districts and Quality of Land 2006–2017

Year State Avg Northwest

North Central Northeast

West Central Central

East Central Southwest

South Central Southeast

All Quality 2006 3204 3783 3478 3187 3410 3716 3725 2580 1927 2849 2007 3908 4699 4356 4055 4033 4529 4272 3209 2325 3463 2008 4468 5395 4950 4590 4823 5280 4743 3626 2573 3913 2009 4371 5364 4827 4464 4652 5026 4796 3559 2537 3832 2010 5064 6356 5746 5022 5466 5901 5447 4325 2690 4296 2011 6708 8338 7356 6602 7419 7781 7110 5905 3407 5705 2012 8296 11404 9560 8523 9216 9365 8420 7015 4308 6172 2013 8716 10960 9818 9161 9449 9877 9327 7531 4791 6994 2014 7943 9615 8536 8151 8424 9087 9008 6513 4475 7215 2015 7633 9685 7962 7861 8061 8505 8506 6372 4397 6892 2016 7183 9243 7562 7313 7358 7841 7917 6060 4241 6716 2017 7326 9388 7802 7543 7377 8097 8218 6058 4172 6864

High Quality

2006 3835 4261 3834 3816 4072 4263 4443 3209 2663 3793 2007 4686 5313 4807 4859 4804 5261 5073 3989 3231 4625 2008 5381 6150 5514 5415 5752 6076 5674 4642 3586 5346 2009 5321 6129 5371 5349 5552 5939 5738 4539 3710 5306 2010 6109 7283 6397 6076 6585 7026 6152 5335 3892 5862 2011 8198 9649 8601 7994 8889 9332 8675 7418 5109 7721 2012 10181 12890 10765 10708 11128 11139 10201 8818 6437 8879 2013 10828 12824 11159 11423 11591 11803 11631 9591 7150 9785 2014 9854 11201 9630 10083 10275 10780 11034 8482 6663 10150 2015 9364 11229 8976 9575 9684 10087 10289 8031 6445 9536 2016 8758 10650 8442 8892 8874 9299 9502 7527 5980 9265 2017 8933 10829 8730 9151 8881 9568 9900 7571 5908 9471

Medium Quality

2006 3011 3561 3223 2987 3213 3458 3501 2442 1866 2679 2007 3667 4385 4026 3777 3796 4194 4005 3047 2296 3270 2008 4195 5023 4568 4339 4537 4919 4405 3425 2527 3721 2009 4076 4977 4450 4193 4371 4615 4465 3386 2443 3535 2010 4758 5883 5300 4664 5111 5386 5445 4140 2596 4053 2011 6256 7708 6713 6290 6981 7029 6510 5553 3353 5468 2012 7773 11011 8691 7815 8619 8466 8128 6732 4219 5685 2013 8047 9918 8824 8573 8725 8930 8567 7137 4715 6605 2014 7359 8698 7874 7591 7827 8327 8388 6108 4318 6715 2015 7127 8834 7352 7460 7581 7758 7934 6038 4282 6525 2016 6705 8468 6992 6994 6870 7186 7396 5683 4128 6283 2017 6849 8555 7218 7236 6824 7426 7674 5756 4079 6548

Low Quality 2006 2195 2566 2500 2248 2293 2615 2505 1729 1373 1786 2007 2656 3210 3125 2853 2738 3004 2928 2175 1583 2131 2008 2967 3580 3408 3296 3187 3469 3214 2298 1757 2271 2009 2884 3490 3281 3177 3134 3203 3240 2286 1685 2281 2010 3357 4161 3976 3517 3542 3724 3840 2868 1794 2620 2011 4257 5196 4900 4352 4766 4848 4671 3824 1984 3335 2012 5119 7162 6303 5288 5877 5718 5013 4484 2562 3226 2013 5298 6845 6421 5670 5926 5918 5449 4592 2843 3651 2014 4878 6091 5428 5256 5173 5582 5479 3860 2808 3891 2015 4834 6252 5372 5242 5082 5292 5366 4070 2750 3797 2016 4665 6019 5164 4847 4577 5158 5153 4189 2892 3783 2017 4689 6216 5265 4965 4684 4993 5305 3935 2824 3768

12

Table 4. Level of Sales Activity, 2017

More Less Same

(Percent) Northwest 21 31 48

North Central 21 41 37

Northeast 23 37 40

West Central 13 51 36

Central 12 63 25

East Central 23 54 24

Southwest 17 41 42

South Central 19 46 35

Southeast 26 31 43

STATE 20 44 37

Table 5. Iowa Land Purchases by Buyer Types, 2017

Existing Local

Farmers

Existing Relocating Farmers New Farmers Investors Other

(Percent)

Northwest 81 1 2 15 1

North Central 70 1 4 24 1

Northeast 76 1 5 17 1

West Central 70 2 4 23 1

Central 68 2 4 24 2

East Central 68 2 4 24 2

Southwest 67 3 4 25 1

South Central 52 4 7 34 3

Southeast 72 2 6 17 3 STATE 70 2 4 22 2

Table 6. Iowa Land Purchases by Seller Types, 2017

Active Farmers Retired Farmers Estate Sales Investors Other

(Percent)

Northwest 12 17 64 5 2

North Central 12 19 56 10 3

Northeast 14 34 43 6 5

West Central 12 23 57 6 2

Central 14 20 55 9 3

East Central 11 23 55 9 2

Southwest 16 23 48 11 2

South Central 16 30 33 19 2

Southeast 9 30 51 7 3 STATE 13 23 54 8 2

13

Table 7. Survey Respondents and Responses by Mode, 2017 (Some respondents report on more than one county)

Paper Online Responses Paper Online Respondents

(Percent) (Percent) Northwest 35 65 121 34 66 103

North Central 42 58 98 40 60 83

Northeast 33 67 110 35 65 91

West Central 35 65 91 34 66 76

Central 44 56 120 41 59 98

East Central 31 69 87 27 73 71

Southwest 33 67 72 36 64 58

South Central 36 64 85 41 59 69

Southeast 27 73 93 33 67 61

STATE 35 65 877 36 64 710

14

Table 8. Survey Respondents by Occupation, 2017

Farm

manager Appraiser Ag

lender Broker/ Realtor

Farmer/ Landowner Government Other

(Percent)

Northwest 16 7 41 21 5 7 4

North Central 10 11 39 17 10 8 6

Northeast 15 5 52 10 7 7 4

West Central 11 8 47 13 8 11 3

Central 19 14 31 11 7 9 8

East Central 11 11 41 17 7 8 4

Southwest 12 10 48 10 10 5 3

South Central 10 3 39 17 19 9 3

Southeast 15 13 46 7 8 10 2

STATE 13 9 42 14 9 8 4

Table 9. Experience and Service Area by District and Respondent Occupation, 2017

Crop reporting district

Years of experience

Number of counties served Occupation

Years of experience

Number of counties served

Northwest 27 8 Farm manager 23 10

North Central 28 7 Appraiser 27 13

Northeast 21 6 Ag lender 22 5

West Central 24 8 Brokers/Realtor 28 14

Central 27 15 Farmer/Landowner 37 4

East Central 24 5 Government 22 2

Southwest 24 6 Other 29 18

South Central 25 12

Southeast 27 8

STATE 25 9 STATE 25 9

15

Table 10. Predicted Percent Change in Local Land Value A Year Later

decrease 10 percent or more

decrease 5-10 percent

decrease 3-5 percent

decrease less than 3 percent

no change

increase 5 percent or less

increase 5-10 percent

increase more than 10 percent

(Percent) Northwest 7 14 9 2 18 18 3 29 North Central 7 17 6 4 20 14 5 26 Northeast 12 11 4 2 18 19 3 32 West Central 7 10 1 3 14 30 3 32 Central 6 8 5 3 21 22 3 32 East Central 6 10 0 0 22 26 2 33 Southwest 6 13 0 6 17 18 3 39 South Central 14 12 1 2 9 21 7 33 Southeast 2 8 1 2 17 22 2 46

STATE 7 11 3 3 18 21 4 33

Table 11. Predicted Percent Change in Local Land Value Five Years Later

decrease 10 percent or more

decrease 5-10 percent

decrease less than 5 percent

no change increase 5 percent or less

increase 5-10 percent

increase 10-20 percent

increase more than 20 percent

(Percent) Northwest 17 3 0 7 10 15 13 35 North Central 17 4 0 4 8 19 15 32 Northeast 14 3 0 7 18 15 9 34 West Central 8 0 0 1 12 22 20 37 Central 4 3 1 6 14 23 15 35 East Central 8 0 2 3 13 18 17 38 Southwest 3 1 0 7 13 15 19 40 South Central 8 2 0 2 11 14 21 41 Southeast 5 0 2 1 9 20 11 52

STATE 10 2 1 5 12 18 15 38

Table 12. Iowa Cash Crop Price Predictions for November 2018 and 2022

Cash Corn Prices Cash Soybean Prices

One Year Later Five Years Later One Year Later Five Years Later

Northwest $3.26 $3.87 $9.19 $10.33

North Central $3.35 $4.00 $9.05 $10.01

Northeast $3.35 $3.90 $9.30 $10.21

West Central $3.30 $3.97 $9.25 $10.28

Central $3.28 $3.98 $9.17 $10.08

East Central $3.40 $4.12 $9.32 $10.55

Southwest $3.31 $4.08 $9.22 $10.44

South Central $3.34 $4.04 $9.29 $10.29

Southeast $3.30 $3.95 $9.14 $10.21

STATE $3.32 $3.98 $9.21 $10.25

16

Table 13. Estimated Average CSR2 and Percent of Land Area by Land Quality, 2017

Reported Average CSR2 Reported Percent of Land Area

High Quality Medium Quality

Low Quality High Quality

Medium Quality

Low Quality

Northwest 88 78 67 45 38 17

North Central 86 76 64 41 40 19

Northeast 83 70 55 33 41 26

West Central 80 67 54 37 42 21

Central 85 74 59 42 40 18

East Central 84 70 52 33 43 24

Southwest 79 65 50 28 47 25

South Central 70 54 40 25 45 30

Southeast 82 66 50 31 39 30

STATE 82 70 56 36 41 23

Table 14. Estimated Average Mortgage and Operating Loan Rate

Interest Rates

20-Year Farmland Mortgage 1-Year Operating Loan

(Percent)

Northwest 4.92 5.55

North Central 4.86 5.29

Northeast 4.79 5.17

West Central 4.78 5.27

Central 4.77 5.34

East Central 4.86 5.06

Southwest 4.96 5.18

South Central 4.87 5

Southeast 5.06 5.45

STATE 4.88 5.27

17

2017 2016

2017 2016 County Name $/acre $/acre $ change % changeDistrict Name $/acre $/acre $ change % change Harrison 7,174$ 7,147$ $27 0.37%Northwest 9,388$ 9,243$ $145 1.6% Henry 6,696$ 6,604$ $92 1.39%North Central 7,802$ 7,562$ $240 3.2% Howard 6,631$ 6,419$ $212 3.30%Northeast 7,543$ 7,313$ $229 3.1% Humboldt 8,555$ 8,307$ $248 2.98%West Central 7,377$ 7,358$ $19 0.3% Ida 8,256$ 8,167$ $89 1.09%Central 8,097$ 7,841$ $257 3.3% Iowa 7,278$ 7,123$ $156 2.19%East Central 8,218$ 7,917$ $302 3.8% Jackson 6,855$ 6,624$ $232 3.50%Southwest 6,058$ 6,060$ -$3 0.0% Jasper 7,583$ 7,441$ $142 1.91%South Central 4,172$ 4,241$ -$69 -1.6% Jefferson 5,442$ 5,367$ $75 1.39%Southeast 6,864$ 6,716$ $148 2.2% Johnson 8,769$ 8,636$ $133 1.54%State Average 7,326$ 7,183$ $143 2.0% Jones 7,485$ 7,296$ $190 2.60%

Keokuk 6,431$ 6,335$ $96 1.52%Kossuth 8,326$ 8,103$ $223 2.75%

2017 2016 Lee 6,539$ 6,459$ $80 1.23%County Name $/acre $/acre $ change % change Linn 8,748$ 8,578$ $170 1.98%Adair 5,535$ 5,530$ $5 0.09% Louisa 7,507$ 7,393$ $114 1.54%Adams 4,763$ 4,758$ $5 0.11% Lucas 3,801$ 3,761$ $40 1.06%Allamakee 5,456$ 5,211$ $245 4.70% Lyon 9,400$ 9,254$ $145 1.57%Appanoose 3,647$ 3,609$ $38 1.06% Madison 6,079$ 6,050$ $29 0.48%Audubon 7,590$ 7,530$ $60 0.80% Mahaska 6,703$ 6,610$ $92 1.40%Benton 8,146$ 7,922$ $225 2.83% Marion 6,570$ 6,490$ $80 1.23%Black Hawk 8,841$ 8,599$ $242 2.81% Marshall 7,676$ 7,474$ $203 2.72%Boone 8,440$ 8,168$ $272 3.32% Mills 7,259$ 7,283$ -$25 -0.34%Bremer 8,402$ 8,139$ $264 3.24% Mitchell 7,696$ 7,503$ $193 2.58%Buchanan 8,153$ 7,913$ $240 3.03% Monona 6,516$ 6,463$ $52 0.81%Buena Vista 9,171$ 8,996$ $175 1.94% Monroe 4,868$ 4,807$ $61 1.27%Butler 7,806$ 7,596$ $210 2.76% Montgomery 5,917$ 5,937$ -$20 -0.34%Calhoun 8,905$ 8,655$ $250 2.89% Muscatine 7,872$ 7,752$ $120 1.55%Carroll 8,482$ 8,342$ $140 1.68% O'Brien 10,354$ 10,194$ $160 1.57%Cass 6,737$ 6,731$ $6 0.09% Osceola 9,069$ 8,929$ $140 1.57%Cedar 8,407$ 8,278$ $129 1.55% Page 5,400$ 5,419$ -$19 -0.34%Cerro Gordo 7,703$ 7,504$ $199 2.66% Palo Alto 8,244$ 8,054$ $191 2.37%Cherokee 8,692$ 8,577$ $114 1.33% Plymouth 9,156$ 9,057$ $99 1.09%Chickasaw 7,317$ 7,084$ $233 3.29% Pocahontas 8,616$ 8,388$ $227 2.71%Clarke 4,029$ 3,991$ $38 0.95% Polk 7,723$ 7,520$ $203 2.70%Clay 8,648$ 8,482$ $165 1.95% Pottawattamie 7,777$ 7,777$ $1 0.01%Clayton 6,936$ 6,625$ $311 4.70% Poweshiek 7,287$ 7,134$ $153 2.14%Clinton 7,403$ 7,225$ $177 2.45% Ringgold 4,106$ 4,084$ $22 0.54%Crawford 7,870$ 7,784$ $86 1.10% Sac 9,005$ 8,858$ $147 1.66%Dallas 7,764$ 7,577$ $188 2.48% Scott 10,497$ 10,335$ $162 1.57%Davis 4,752$ 4,693$ $59 1.26% Shelby 7,726$ 7,693$ $33 0.42%Decatur 3,480$ 3,443$ $36 1.06% Sioux 10,202$ 10,066$ $136 1.35%Delaware 8,703$ 8,379$ $324 3.87% Story 8,652$ 8,376$ $276 3.30%Des Moines 7,244$ 7,145$ $99 1.39% Tama 7,667$ 7,455$ $212 2.85%Dickinson 8,220$ 8,093$ $127 1.57% Taylor 4,318$ 4,315$ $3 0.07%Dubuque 7,951$ 7,615$ $335 4.41% Union 4,869$ 4,842$ $27 0.55%Emmet 8,410$ 8,248$ $162 1.97% Van Buren 5,061$ 4,999$ $62 1.25%Fayette 8,000$ 7,694$ $306 3.97% Wapello 5,459$ 5,384$ $76 1.41%Floyd 7,512$ 7,323$ $189 2.58% Warren 6,588$ 6,504$ $84 1.30%Franklin 7,750$ 7,538$ $213 2.82% Washington 8,339$ 8,214$ $125 1.52%Fremont 6,400$ 6,422$ -$22 -0.34% Wayne 3,702$ 3,664$ $39 1.06%Greene 7,868$ 7,666$ $202 2.64% Webster 8,526$ 8,265$ $261 3.15%Grundy 8,816$ 8,552$ $264 3.09% Winnebago 7,194$ 7,003$ $191 2.73%Guthrie 6,862$ 6,773$ $88 1.31% Winneshiek 6,856$ 6,592$ $263 3.99%Hamilton 8,861$ 8,589$ $271 3.16% Woodbury 6,746$ 6,691$ $55 0.83%Hancock 7,772$ 7,565$ $207 2.73% Worth 7,158$ 6,973$ $185 2.66%Hardin 8,133$ 7,883$ $249 3.16% Wright 8,645$ 8,395$ $251 2.99%

By County: 2016-2017

By Crop Reporting District: 2016-2017

Comparative Iowa Land Values2016-2017

2016-2017

19

20

21

22

23

Iowa Nominal and inflation-adjusted average value per acre of Iowa farmland

Annual Percentage Change in Nominal Iowa Farmland Values 1942–2017

 $‐

 $1,000

 $2,000

 $3,000

 $4,000

 $5,000

 $6,000

 $7,000

 $8,000

 $9,000

 $10,000

1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017

Nominal land values Inflation adjusted land values

‐40.0%

‐30.0%

‐20.0%

‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017

Annual Percentage

 Chan

ge (%)

24

Iowa Farmland Sale Activity 1985–2017

0

10

20

30

40

50

60

70

1985 1989 1993 1997 2001 2005 2009 2013 2017

More Less Same

‐20.0%

‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

0

20

40

60

80

100

120

140

160

1989 1993 1997 2001 2005 2009 2013 2017

Percent_Change Index Benchmark

25

Buyers of Iowa Farmland 1989–2017

0

10

20

30

40

50

60

70

80

90

1989 1993 1997 2001 2005 2009 2013 2017

Existing Farmers Investors New Farmers Other

26

Positive and Negative Factors of Iowa Farmland Market, November 2016–November 2017

0

5

10

15

20

25

FavorableInterest Rates

Strong Yields Land Availability(Limited Supply)

Investor Demand Cash/CreditAvailability

Strong Demand(Many Buyers)

Positive Factors, 2017 (Percent)

0

5

10

15

20

25

30

35

40

45

CommodityPrices (Lower)

Cash/CreditAvailability

Input Costs(Higher)

Cash Rent Rates(Weak)

Uncertain AgFuture

StrongAlternatives ‐Stock Market,

Economy

Negative Factors, 2017 (Percent)