What’s Driving the 3.1% Decline in Iowa Farmland Values?

Iowa farmland values fell an average of 3.1% in 2024, according to the 2024 Iowa State University (ISU) Land Value Survey. A separate report from Peoples Co. suggests the factors influencing farmland values in Iowa are also impacting other Corn Belt states.

ISU’s survey found the statewide average value for farmland was $11,467 per acre as of Nov. 1, 2024. This was a decrease of $369 per acre from a year prior. When split into high, medium, and low quality farmland, the state average for all three categories also experienced a drop year-over-year.

Influencing Factors

ISU’s report said survey respondents cited positive and negative market factors.

Top Three Positive Factors:

1. Limited land supply, mentioned by 23% of respondents
2. Strong yields, mentioned by 16.5% of respondents
3. The combination of cash on hand and credit availability, cited by 12.1% of respondents.

“Other frequently mentioned positive factors included strong land demand, including from investors (12.5%), a recent history of favorable interest rates (4.6%), and a good farm economy overall (3.7%),” said the ISU report.

Negative Factors:

Negative market factors discussed in the ISU report included:

1. Lower commodity prices, mentioned by 33.8% of respondents
2. Interest rate increases in recent years, mentioned by 30% of respondents
3. Higher input costs, cited 9.3% of the time
4. Cash and credit availability, mentioned by 3.1% of respondents
5. Weather uncertainty, mentioned by 2.8% of respondents
6. Inflation, cited 2.7% of the time
7. Uncertainty in agricultural profitability, mentioned by 2.1% of respondents.

“In general, the results from the 2024 Iowa State University Land Value Survey are similar to the results from other surveys, which all highlight modest declines in farmland values due to higher interest rates and lower commodity prices,” said the ISU report.

Peoples Co. Report

A recent report from Peoples Co. sites some of the same factors when discussing land investment in the Corn Belt, which includes Illinois, Indiana, Iowa, Missouri, and Ohio for the purposes of Peoples Co.’s report.

“The Corn Belt has long been a target for both financial investment in agriculture, and the region with the most sophistication in large-scale farm operations,” said the Peoples Co. report. “The historic financial performance has been remarkable relative to competing investments, but the current uncertainties about inflation, interest rates, and income have created a greater variability in local market conditions than at any other time in the recent past.” 

The Peoples Co. report also discussed uncertainty around federal policy as an influencing factor in the market.

“Government payments for, and societal interest in moving toward a lower-carbon energy sector has transitioned the conversation about farmland from being cited as a primary pollutant to being recognized as a critical resource to move toward greener energy generation in the future, while at the same time, the incoming [presidential] administration has clearly signaled de-emphasized ‘greening’ projects in energy,” said the report.

“Interest rate markets have normalized, but inflation and inflation uncertainty as signaled by option volatility on inflation-linked futures has expanded dramatically. Inflation has a positive impact on long-term appreciation, but is inextricably linked to issues that affect demand and can quash short-term incomes,” the report continued. “In total, the factors surrounding agricultural production and investment valuation models that created the steady and competitive returns, inflation hedging features, and diversification benefits in the Corn Belt region appear to remain, and returns are still relatively more attractive, but in a much expanded possibility set. The longer-term prospects remain positive, but shorter-term, minor additional pullbacks would not be surprising.”