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2017 ISU Land Value Survey Dr. Wendong Zhang [email protected] , 515-294-2536 Assistant Professor of Economics and Extension Economist ISU Alumni Center, Ames, Iowa December 12, 2017
2017
ISU Land Value Survey
Dr. Wendong Zhang
[email protected], 515-294-2536
Assistant Professor of Economics and Extension Economist
ISU Alumni Center, Ames, Iowa
December 12, 2017
A Quick Introduction:
Dr. Wendong Zhang
– Grown up in a rural county (with only 1 million people) in Shandong Province, China
– Attended college in Shanghai and Hong Kong
– Ph.D. in Ag Econ in 2015 from Ohio State
– 2012 summer intern at USDA-ERS on farm economy and farmland values
– Research and extension interests:
land value/ownership https://www.card.iastate.edu/farmland
agriculture and the environment
China Ag: quarterly Ag DM articles https://www.card.iastate.edu/china
My Hometown:
Shenxian, Shandong
Province
The Survey is also Online!
710 respondents877 land value estimates64% of the respondentsparticipated online
ISU Land Value Survey – How to Interpret
• It is an opinion survey
• It is an expert opinion survey: respondents - ag professionals
• The first of its sort in the nation started 1941
• The only survey that offers county-level land value estimates since
1950
• It is not designed to value individual parcels
• The percent change is more important than the actual dollar amount,
and when comparing across surveys, compare their percent change
• To value individual parcels – consult appraisers or comparable sales
Why Care
About
Farmland
Market?
Number of Respondents and
Responses by District and Mode, 2017
Responses Respondents
Paper Online Total Number
Paper Online Total NumberPERCENT PERCENT
Northwest 35 65 121 34 66 103
North Central 42 58 98 40 60 83
Northeast 33 67 110 35 65 91
West Central 35 65 91 34 66 76
Central 44 56 120 41 59 98
East Central 31 69 87 27 73 71
Southwest 33 67 72 36 64 58
South Central 36 64 85 41 59 69
Southeast 27 73 93 33 67 61
STATE 35 65 877 36 64 710
Survey Respondents by Occupation, 2017
Farm
manager Appraiser
Ag
lender Broker/Realtor
Farmer
/Landowner Government Other
PERCENT
Northwest 16 7 41 21 5 7 4
North Central 10 11 39 17 10 8 6
Northeast 15 5 52 10 7 7 4
West Central 11 8 47 13 8 11 3
Central 19 14 31 11 7 9 8
East Central 11 11 41 17 7 8 4
Southwest 12 10 48 10 10 5 3
South Central 10 3 39 17 19 9 3
Southeast 15 13 46 7 8 10 2
STATE 13 9 42 14 9 8 4
Experience and Service Area by Occupation
Crop reporting district Years of experienceNumber of
counties servedOccupation Years of experience
Number of
Counties Served
Northwest 27 8 Farm manager 23 10
North Central 28 7 Appraiser 27 13
Northeast 21 6 Ag lender 22 5
West Central 24 8 Brokers/Realtor 28 14
Central 27 15 Farmer/Landowner 37 4
East Central 24 5 Government 22 2
Southwest 24 6 Other 29 18
South Central 25 12
Southeast 27 8
STATE 25 9 STATE 25 9
STATEWIDE AVERAGE
$7,326
Nov 2017
up 2.0%
up $143
HIGH QUALITY LAND
$8,933
Nov 2017
up 2.0%
up $175
MEDIUM QUALITY LAND
$6,849
Nov 2017
up 2.2%
up $143
LOW QUALITY LAND
$4,689
Nov 2017
up 0.5%
up $24
AVERAGE VALUESall farmland 1941−2017
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017
Nominal land values Inflation adjusted land values
% Change in Nominal Iowa Farmland
Values 1942-2017
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017
An
nu
al P
erc
en
tage
Ch
ange
(%
)
The
“temporary
break” in
continued
declines
results
from
limited land
supply
Source: Ag Decision Maker
Iowa
Farmland
Sale
Activity
Since
November
2016
More Less Same
PERCENT
Northwest 21 31 48
North Central 21 41 37
Northeast 23 37 40
West Central 13 51 36
Central 12 63 25
East Central 23 54 24
Southwest 17 41 42
South Central 19 46 35
Southeast 26 31 43
STATE 20 44 37
Iowa Farmland Sale Activity
Relative to A Year Ago 1985-2017
0
10
20
30
40
50
60
70
1985 1989 1993 1997 2001 2005 2009 2013 2017
Perc
ent
More Less Same
Land owners more likely to hold
onto their land during down years
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
0
20
40
60
80
100
120
140
160
1989 1993 1997 2001 2005 2009 2013 2017
Percent_Change Index Benchmark
Sale Activity Index = % Reported More Sales - % Reported Less Sales + 100
ISU Survey Results Echo Other Surveys
USDA June Area Survey,
August 2017
USDA NASS June Area SurveyNovember 2016 to November 2017
Ag Real Estate Values: + 2.3%Cropland Values: No changePasture Values: +1.5%
Federal Reserve Bank of Chicago
November 2017 Ag Letter
ISU Survey Results Echo Other Surveys
However,
don’t rush
to conclude
a turn of
the
farmland
market
Federal Reserve Bank of Kansas City
kcFED Ag Credit Survey
% Change in Inflation-adjusted Iowa
Farmland Values 1942-2017 (decrease 0.2%)
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017
Indiana and Illinois both show declines
Purdue University
Illinois Chapter of American Society of Farm Managers and Rural Appraisers
US Farm
Income
1990-
2026
Source: USDA OCE 2016
Long-term Ag Outlook to 2026
2018/19
Crop
Margins
@ Actual
Yields
and Basis
Source: Chad Hart
Source: Fed Reserve
September 2017 dot plot
Long-term
interest rate
expectations
What the Fed
Reserve
thinks the
interest rate
should be
September 2017
DistrictAverage
Value% Change
High
Quality% Change
Medium
Quality% Change
Low
Quality% Change
Northwest $9,388 1.6% $10,829 1.7% $8,555 1.0% $6,216 3.3%
North Central $7,802 3.2% $8,730 3.4% $7,218 3.2% $5,265 2.0%
Northeast $7,543 3.1% $9,151 2.9% $7,236 3.5% $4,965 2.4%
West Central $7,377 0.3% $8,881 0.1% $6,824 -0.7% $4,684 2.3%
Central $8,097 3.3% $9,568 2.9% $7,426 3.3% $4,993 -3.2%
East Central $8,218 3.8% $9,900 4.2% $7,674 3.8% $5,305 3.0%
Southwest $6,058 0.0% $7,571 0.6% $5,756 1.3% $3,935 -6.1%
South Central $4,172 -1.6% $5,908 -1.2% $4,079 -1.2% $2,824 -2.3%
Southeast $6,864 2.2% $9,471 2.2% $6,548 4.2% $3,768 -0.4%
Iowa Avg. $7,326 2.0% $8,933 2.0% $6,849 2.2% $4,689 0.5%
Land Values by District and Quality, Nov 2017
District
Livestock Inventory - 2012 Acres 2012 Harvested Acres 2017
Chickens, Layers Hogs Milk Cows Cattle Pasture Timber Corn Soybean
Northwest 30% 26% 29% 22% 7% 2% 15% 16%
North Central 64% 16% 4% 6% 4% 4% 14% 13%
Northeast 1% 12% 51% 16% 11% 23% 12% 8%
West Central 0% 13% 1% 13% 10% 7% 15% 16%
Central 3% 13% 1% 7% 8% 8% 15% 14%
East Central 1% 5% 10% 11% 11% 14% 11% 10%
Southwest 0% 2% 0% 9% 12% 5% 8% 10%
South Central 0% 2% 1% 9% 25% 19% 4% 6%
Southeast 1% 11% 3% 6% 12% 19% 7% 8%
Iowa Total 52.2 million 20.4 million 0.17 million 3.8 million 2.5 million 1.2 million 12.9 million 10.0 million
Livestock and Crop Inventory by Crop Reporting District
Federal Reserve Bank of Chicago
November 2016 Ag Letter
Crop and livestock prices – September
2017 – Chicago Fed Ag Conditions Survey
Source: Chicago Fed Ag Letter 2017
Stronger than expected crop yields
USDA NASS QuickStats
Corn Yield: November 1, 2017
Bushels per Acre
State Average: 197.0 bu/acre
Soybean Yield: November 1, 2017
Bushels per Acre
State Average: 56.0 bu/acre
Source: USDA NRCS; USDA FSA
Below: %
Reduction in
CRP Rental
Rate 2017 vs.
2016
Above: Acres
enrolled in CRP,
2017
Land
Values by
County,
2017
CSR2 –
Corn
Suitability
Rating
Source: ISU Agronomy
Percent
Changes in
Land
Values
from Nov
2016
Iowa Major
Soil
Association
Source: USDA NRCS
Major Positive Factors Affecting
Iowa Farmland Market, 2017
0
5
10
15
20
25
FavorableInterest Rates
Strong Yields Land Availability(Limited Supply)
InvestorDemand
Cash/CreditAvailability
Strong Demand(Many Buyers)
Positive Factors, 2017 (Percent)
Major Negative Factors Affecting
Iowa Farmland Market, 2017
05
1015202530354045
Commodity Prices(Lower)
Cash/CreditAvailability
Input Costs(Higher)
Cash Rent Rates(Weak)
Uncertain AgFuture
StrongAlternatives -Stock Market,
Economy
Negative Factors, 2017 (Percent)
Iowa Farmland Purchases by Buyer Types, 2017
Existing Local Farmers
Existing Relocating
Farmers New Farmers Investors Other
PERCENT
Northwest 81 1 2 15 1
North Central 70 1 4 24 1
Northeast 76 1 5 17 1
West Central 70 2 4 23 1
Central 68 2 4 24 2
East Central 68 2 4 24 2
Southwest 67 3 4 25 1
South Central 52 4 7 34 3
Southeast 72 2 6 17 3
STATE 70 2 4 22 2
Iowa Farmland Purchases
by Buyer Types 1989-2017
0
10
20
30
40
50
60
70
80
90
1989 1993 1997 2001 2005 2009 2013 2017
Pe
rce
nt
Existing Farmers Investors New Farmers Other
Active Farmers Retired Farmers Estate Sales Investors Other
PERCENT
Northwest 12 17 64 5 2
North Central 12 19 56 10 3
Northeast 14 34 43 6 5
West Central 12 23 57 6 2
Central 14 20 55 9 3
East Central 11 23 55 9 2
Southwest 16 23 48 11 2
South Central 16 30 33 19 2
Southeast 9 30 51 7 3
STATE 13 23 54 8 2
Iowa Farmland Purchases by Seller Types, 2017
High land Quality has a local meaning!
Reported Average CSR2 Percent of Land Area
High QualityMedium Quality
Low Quality High QualityMedium Quality
Low Quality
Northwest 88 78 67 45 38 17
North Central 86 76 64 41 40 19
Northeast 83 70 55 33 41 26
West Central 80 67 54 37 42 21
Central 85 74 59 42 40 18
East Central 84 70 52 33 43 24
Southwest 79 65 50 28 47 25
South Central 70 54 40 25 45 30
Southeast 82 66 50 31 39 30
STATE 82 70 56 36 41 23
One and Five Year Cash Crop Price Predictions
Cash Corn Prices Cash Soybean Prices
A Year Later Five Years Later A Year Later Five Years Later
Northwest $3.26 $3.87 $9.19 $10.33
North Central $3.35 $4.00 $9.05 $10.01
Northeast $3.35 $3.90 $9.30 $10.21
West Central $3.30 $3.97 $9.25 $10.28
Central $3.28 $3.98 $9.17 $10.08
East Central $3.40 $4.12 $9.32 $10.55
Southwest $3.31 $4.08 $9.22 $10.44
South Central $3.34 $4.04 $9.29 $10.29
Southeast $3.30 $3.95 $9.14 $10.21
STATE $3.32 $3.98 $9.21 $10.25
One Year Farmland Values Predictions (Percent)
decrease 10 percent or more
decrease 5-10 percent
decrease 3-5 percent
decrease less than 3 percent no change
increase 5 percent or less
increase 5-10 percent
increase more than 10 percent
Northwest 7 14 9 2 18 18 3 29
North Central 7 17 6 4 20 14 5 26Northeast 12 11 4 2 18 19 3 32
West Central 7 10 1 3 14 30 3 32Central 6 8 5 3 21 22 3 32
East Central 6 10 0 0 22 26 2 33Southwest 6 13 0 6 17 18 3 39
South Central 14 12 1 2 9 21 7 33Southeast 2 8 1 2 17 22 2 46
STATE 7 11 3 3 18 21 4 33
Five Year Farmland Values Predictions (Percent)
decrease 10 percent or more
decrease 5-10 percent
decrease less than 5 percent
no change increase 5 percent or less
increase 5-10 percent
increase 10-20 percent
increase more than 20 percent
Northwest 17 3 0 7 10 15 13 35
North Central 17 4 0 4 8 19 15 32Northeast 14 3 0 7 18 15 9 34
West Central 8 0 0 1 12 22 20 37Central 4 3 1 6 14 23 15 35
East Central 8 0 2 3 13 18 17 38Southwest 3 1 0 7 13 15 19 40
South Central 8 2 0 2 11 14 21 41Southeast 5 0 2 1 9 20 11 52
STATE 10 2 1 5 12 18 15 38
Source: USDA-NASS;
Ag Census, Iowa Farmland
Value Portal
Inflation-
adjusted
Iowa Ag
Real
Estate
Values
1850-
2017
Farm Crises and
this downturn
Positive
1: Real
Income
Growth
2003-
2013
Source: USDA-ERS,
Ag DM C2-70
Zhang and Tidgren 2017
Iowa Landowners tend to hold the
farmland; and many don’t have debt
Years Owned % of Iowa
Farmland
<10 years 24%
10-20 Years 21%
20-30 Years 19%
30-40 Years 15%
> 40 Years 20%
Source: Ag DM PM19802012 Iowa FarmlandOwnership and Tenure Survey
Source: http://www.multpl.com/
10-year-treasury-rate
Positive 2: Historically low interest rates
Positive 3: Prudence in Ag
Lenders/Regulators
• Shifts from individuals to more regulated institutional lenders
• Banking Regulations
– More stringent, frequent stress-test
– (Ron Hansen – Iowa Division of Banking Superintendent) walk into this “with eyes wide open”
• Changes in Loan Practices (FCS, Iowa)
– Before 1987: loan to value ratio is 85%
– 1987-2008: loan to value ratio is 65%
– After 2008: use cash-flow method for collateral ($4 corn, $10 bean) and 50% of cash flow value
Source: Zhang and Tidgren, 2017
Jim Knuth, FCS America
0
50
100
150
200
250
300
350
400
450
1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Cas
h R
ent
or
Mo
rtga
ge P
aym
ents
($
/acr
e)Annual Mortgage Payments vs. Cash Rents for Iowa Farmland Loan
Cash Rent 20-yr PMT 30-yr PMT 15-yr PMT
Source: Zhang and Tidgren 2017
Iowa Farmland
Value Portal
#ISUlandvalue
https://www.card.iastate.edu/farmland
Thank You!
Wendong ZhangAssistant Professor and Extension
Economist
478C Heady Hall
Iowa State University
515-294-2536
http://www2.econ.iastate.edu/faculty/zhang
