Iowa Land Supply and Price Update Q2 2021

The farmland market and the agricultural economy have seen a remarkable ride over the past year-the world shut down in early 2020 with unprecedented uncertainty and anxiety; however, the agricultural commodity markets and the land market have gained noticeable strength since fall 2020. Record government support, historically low interest rates, and surging agricultural exports led to a 10% or more hike in farmland values for almost all Midwestern states. The Q2 2021 update provides concrete evidence of this recent surge: • Low interest rates, strong government payments, surging agricultural exports, and concerns about drought are behind the rise over the past six months. The Q2 2021 farmland auction prices for 85% tillable grounds increased more than 20%, rising from $9,956/acre in Q1 2021 to $11,907/acre in Q2 2021. The implied sales prices for all land quality classes have risen to much higher levels of $133-$172/CSR2. This reflects tremendous surges in commodity prices as corn futures prices rose from $5/bushel in late 2020 to $6-$7/bushel in the last two months. • The recent surge is consistent with reports from several other sources-the Federal Reserve Bank of Chicago reported a 10% annual increase since last April and the Farmers National Company's June Land Values Report showed a 5%-15% hike over the last six months due to competitive bidding. • Farmland supply is still tight-only 42,785 and 31,787 acres were sold in Q1 and Q2 in 2021, respectively, and limited land supply tends to support land values. As of July 1, 2021, there are only 31,798 acres of Iowa farmland available for sale via auction or real estate listings, but the higher offered prices and possible tax policy changes might induce more land supply. • The farmland auction sales prices for all land qualities lead to even more dramatic increases for lower quality land with the $/CSR2 rising from $115/CSR2 to $172/CSR2 in Q1 2021. This is due to the extremely tight land supply and the strong demand for farmland. • Farmland auctions are the primary mode of land sales in Iowa's Northwest, North Central, West Central, and Central crop reporting districts; while in southern Iowa and northeast Iowa, real estate listings are the dominant method.