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Dec. 2, 2022 by Jim Rothermich, VP, Iowa Appraisals Greetings! Harvest 2022 is pretty much completed. The 2022 crop year will go down in history as better than expected. With the hot, dry weather during corn pollination and lack of much needed rain in August, I did not expect yields to turn out as they did. Overall, with disappointment in some areas, most growers I've spoken with were pleased with their yields. A new state record for land price was set in Sioux County, with 73.19 acres selling at $30,000/acre (no influence from development, no wind turbines). At least two other county price records were set in November, Lee County at $22,700/acre and Cherokee County at $21,000/acre, both some distance from their previous county record. Land market conditions are strong with a high degree of variability. We have record prices in areas and a slow uptick in farms that struggle to get bids or are a "no sale" at auction in other areas. Higher interest rates are shrinking the buyer pool, and market conditions are re-adjusting to current economic conditions. Seller expectations remain high, which continues to be a challenge for farm realtors. How can the land market still be setting price records when interest rates are higher than they have been in a long time, and projected to go higher? Well, it comes down to the amount of liquidity in the country. I think the cash positions of some who are buying land are underestimated.
The graph above illustrates the liquidity currently in the market. (Though it represents net farm income in Illinois, I think it mirrors what is happening in Iowa.) A 1,300-acre producer made $446,212 in 2021 and is projected to make $350,000 in 2022. That equates to $796,212 in net farm income for the past two years - no wonder there is so much liquidity in the country. Imagine what the net income would be for those who farm several thousand acres! Or carry no debt on land. This could explain why land prices are hitting new records and cash rents are going up. Two years of historical record net farm income equals strong cash positions. Until the cash positions shrink, the variability will continue. To view recent sales and cash rents click here. Tweet |
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