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Iowa farmland values continue to rise, but trend expected to slow

George C. Ford, CR Gazette –

The value of good Iowa farmland continued to rise in the first quarter of the year and scored double-digit gains in every area of the state year over year, according to a report from the Federal Reserve Bank of Chicago.

Farmland values rose 4 percent in Iowa from Jan. 1 through April 1 and jumped 27 percent from April 1, 2011, through April 1, 2012. Northeast Iowa farmland led all areas of the state with a 7 percent quarterly increase and a 30 percent jump on a year-over-year basis.

Agricultural land values in the five-state Seventh Federal Reserve District increased 5 percent in the first quarter and 19 percent from April 1, 2011, through April 1, 2012. District farmland cash rental rates climbed 17 percent in the first quarter compared with the same quarter of 2011.

The demand to purchase farmland in the six months that ended on March 31 was higher relative to that in the six months that ended on March 31, 2011.

David Oppedahl, the Federal Reserve business economist who prepared the report, said bidding among farmers was common at farmland auctions, driving up bids.

and#x201c;There were scattered reports of auctions where a reserve price was not met,and#x201d; Oppedahl said. and#x201c;Relative to investors, farmers again purchased a higher share of the acres sold in the past three to six months, although investors were actively searching for properties across the district.and#x201d;

Oppedahl said farmland rental rates climbed 17 percent from 2011 to 2012, the second-largest increase in the history of the Federal Reserve survey of district agricultural bankers. Cash rental rates rose 20 percent in Iowa, 15 percent in Illinois, 15 percent in Indiana, 12 percent in Michigan, and 19 percent in Wisconsin.

Oppedahl said the five top increases in cash rental rates have come in the past six years, after adjusting for inflation. Higher commodity prices and net farm incomes helped drive up farmland values last year and the same fundamental factors pushed up cash rental rates.

The bankers surveyed by Oppedahl expect the trend toward higher farmland values to ease in the current quarter. A third of the respondents expected farmland values to increase during the April through June period, while 1 percent expected declines.

Nearly two-thirds of the surveyed bankers looked for farmland values to stabilize.

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