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FRB: Iowa farmland values rose

By Staff | Feb 28, 2013

CEDAR RAPIDS (AP) – Iowa farmland values rose 20 percent last year as the state struggled with drought, but managed to limit crop losses, according to a survey by the Federal Reserve Bank of Chicago.

The bank’s survey echoes Iowa State University’s annual Iowa Land Value Survey, which is conducted in November. The ISU survey said the value of an average acre of good Iowa farmland rose almost 24 percent from October 2011 to October 2012.

The biggest increase was in east central Iowa, which includes Linn, Johnson and surrounding counties. That region saw a 12 percent increase in the last quarter of the year and a 24 percent increase compared to last year.

The increases came amid a severe drought that Federal Bank economist David Oppedahl said resulted in a 25 percent drop in production of corn and 9.4 percent drop in soybeans compared to 2011.

Those losses were severe, but less than some earlier droughts and resulted in rising crop prices.

Another reason for the soaring values in late 2012 could have been the possibility of increased federal taxes and estate taxes in 2013, when those tax cuts were set to expire. That led to more farmland auctions late in the year, even though most of those increases didn’t ultimately occur.

“People were making business decisions because of tax policy that was going to change, but it didn’t change,” said Kirk Weih, vice president of Hertz Farm Management in Mount Vernon. “Unfortunately making decisions based on tax policy isn’t always the most prudent.”

Throughout the 7th Federal Reserve District – made up of Iowa, Illinois, Indiana, Michigan and Wisconsin – values rose 7 percent in the last quarter of 2012 and 16 percent for the year.

Weih, who is a past president of the American Society of Farm Managers and Rural Appraisers, said farmland values can’t keep rising so dramatically.

“Long term, over a period of 15 to 25 years, farmland has returned 7 percent to 10 percent appreciation,” Weih said. “We have seen 100 percent appreciation in the last five years, and that’s not sustainable.

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