Steady drops in prices for corn and other crops expected to lower farmland values in Corn Belt

For several years farmland prices have continued to hit record levels, especially in the Corn Belt, leading to the fear of a bubble that could burst. With corn and other crop prices falling, experts say land values are likely to fall, even though farmland prices in places such as Iowa keep rising or holding steady. (Agriculture.com photo)

The Iowa Land Value Survey said Wednesday that "Iowa farmland's worth an estimated $8,716/acre, a 5.1 percent increase over the same time a year ago," Jeff Caldwell reports for Agriculture.com. "Northwest Iowa saw the highest values, with Scott County hitting a $12,413/acre average price, more than 12 percent higher than a year ago, the highest year-over-year climb in the state. But, Scott County's in an area that, though containing some of the state's highest-value land, has already seen a slight decline from a year ago, according to Iowa State University Extension farm management economist Mike Duffy, who conducts the biannual survey of land values." Duffy said record-high county land values is likely sign of a plateau.

"Iowa corn and soybean price movements are good indicators of gross farm income movement," Duffy's report says. "There was a 33 percent drop in the Iowa average corn price from October 2012 to October 2013 and there was an 11 percent drop in soybean prices over the same time period. The November estimated price for Iowa corn was 39 percent lower than the November 2012 price. Soybean prices were 11 percent lower. The odds are against a major collapse in land values. But, if projections of a new lower level for commodity prices hold, we should expect land values to drop."

Steve Bruere, president and owner of Peoples Co., a farmland brokerage based in Clive, Iowa, told Caldwell, "With the pullback in commodity prices, balance sheets are going to take a hit. Not only is the grain in the bin worth less, but the value of the farmland is directly correlated to commodity prices. If corn stays in the $4 [per bushel] neighborhood, it’s going to be challenging to maintain current rental rates, as bankers will start to pull in the reins on financing aggressive rents. Ultimately, this means lower land values." (Read more) (Iowa State University graphic; click on it for larger image)