Fall is selling season for the farmland market, or buying season depending on your perspective. We’ve often noted that 75% of public land auctions occur during the second half of the year, with volume increasing each month into early December. This year may be an anomaly, given the high volume that sold during the first half of the year; however, volume this fall is still considerable.
Looking strictly at farmland with at least 85% tillable acreage, volume during the 1st quarter of 2022 was similar to the previous four years; however, 2nd quarter sales volume was drastically higher, matching 4th quarter volume from several previous years.
Sales volume across our Iowa trade territory on 85% tillable or higher farmland ran 18,000 to 20,000 acres from 2018-2020. In 2021, that figure exceeded 39,000 acres. Through mid-October, we’ve tracked over 25,000 acres sold at auction. While 4th quarter volume is high, it will not likely be enough to accumulate 75% for the 2nd half of the year.
Prices
Staying focused on 85% or more tillable land, the average price across the 23 counties in northwestern Iowa has exceeded $15,000 per acre. Good land in one neighborhood may approach or exceed $20,000 per acre these days while a similar farm in another neighborhood will top out significantly less. These are still legitimately good results for the given locale.
Speaking of $20,000 per acre, we’ve tracked 71 sales at $20,000 or higher.
What do these farms have in common? Nearly all are located in areas with livestock concentration, and nearly all are located in the Galva-Primghar-Sac soil association of northwestern Iowa.
That being said, there are still numerous farms selling for less than $10,000 per acre. Each property has reasons for its value as determined by its selling price. Please don’t assume your smart phone can provide insight for differences in values.
Lately?
Discussion about the influence of interest rates on land values has been a very legitimate question the past few months. As of October 20th, the prime rate was 6.25% which is the highest rate since early 2008. An article by Dr. Wendong Zhang (Cornell University, formerly Iowa State) published in April predicts that interest rates won’t substantially affect land values until later in 2023. In addition to higher cost of borrowing, higher “safe” rates paid on cash in the bank may become a more attractive alternative.
At this time, we’re seeing land values basically stabilized at the levels achieved earlier this year. Of course, you can find individual sales which could indicate higher or lower values, but the overall trend has been steady over the past few months. By that, could you infer that interest rates have affected values? Perhaps, but the market does need to take a breather after two years of such rapid increases.
Bottom Line?
As farm managers, we believe in the value of maintaining land ownership for decades. However, all things have their life cycle which includes ownership of farmland. If that describes your position in life, we see no reason to try to “out-smart” a strong market. If “buyer” describes your position in life, we see ample reasons to be bullish on Iowa farmland ownership. One of the best is its 150-year history of rising values based on increasing demand for our products.
South Dakota
We’ve increased our database of sale results in southeastern South Dakota in 2022. Sticking with highly tillable farmland, we find nearly 3/4 bringing $10,000 per acre or more, with several advancing past $15,000 to $17,000 in the right circumstance.
South Dakota uses Productivity Index as its soil rating, in place of Iowa’s Corn Suitability Rating. The average PI in our database for this analysis was 77.1 with a high of 89.8. Only a few of the highly tillable farms fell into the 50’s on the PI scale. Average size of transaction was $1.33 million. Southeastern South Dakota shares similar soil types with Iowa along the Missouri River. The Trent-Moody soil association found on the uplands crosses over into the northwestern corner of Iowa.
Following are two tables of selected sales of “good” farmland in Iowa and South Dakota which have sold recently in the region. Stalcup-brokered sales are in bold and highlighted in green.
