Duffy: Little change in 2015 land values
By JOLENE STEVENS
SIOUX CITY – Gone are the days when this time of the year farmers would be gathering in their local elevators, farm implement waiting rooms and favorite coffee shops to make their fall crop predications as they awaited harvest results.
Although modern-day technology has changed those once familiar gatherings, northwest Iowa farm operators, owners and managers met Aug. 18 to get insight into Iowa land values and the 2015 harvest at the Farmland Values and Agricultural Economics exchange, sponsored by Security National Bank, in Sioux City.
Mike Duffy, emeritus professor of economics at Iowa State University and the state’s on-going record-keeper of Iowa land values, told an audience of 280, “The land market at present is really just kind of floating,” Duffy said. “We’ve had a very good year crop-wise with prices now off from where they were.
“We saw land values for last year down 6 to 9 percent, flat for the last quarter and currently with no change.”
It’s a wait and see situation, he said.
“What appears to be going on is that we’re waiting to see what kinds of yields our harvest is going to bring.
“This is going to be a big factor in our land value picture.”
Duffy said rent and other costs of production, which have not slid downward with futures prices, make for tight budgeting.
Even so, rent, like land values, is on the way down.
“If you’d have told me five years ago we were going to have $3.80 to $3.90 corn,” Duffy said, “this would have been good to know.
“I think there are some people out there beginning to think that’s what we should expect when we’re looking ahead.”
Duffy linked grain prices and farmland values saying, “An over-all rule of thumb (for determining land prices) and how these values are affected by income is that if you lose 10 percent of your income, land values will drop about five percent.
“Usually this doesn’t happen overnight, but it’s a definite relationship worth looking at when land is under pressure.”
“Most of our crops here in Iowa, I feel, are pretty safe with exception of areas where a lack of nitrogen is going to hurt corn further south and east and rainfall has been severe in southwest Iowa,” said Rex Wilcox, president of Stalcup Ag Services, in Storm Lake.
“Generally, however, I’d say northwest Iowa is going to have some very good crops with some farms even having some record yields.
“Among things to watch is whether the U.S. Department of Agriculture is going to have a good handle or not on their latest projections.
“I guess I tend to think we’ll come in with (numbers) somewhat less than what they’ve estimated. Should this be the case I think we’ll see some better grain prices out into the post-harvest period.
“This is something we need because if we don’t get it, there’ll be a lot of people with cash flows that won’t work all that well.”
Wilcox said that while some older farms will feel a budgetary pinch, younger farmers who’ve borrowed more money for their farm operations will feel it worse.
“When an older farmer owns his land it’s always a way to be secure,” Wilcox said. “The more land you own, the better off you are.”
Wilcox said he’s concerned over fall storage capacity problems with a large crop maturing toward harvest.
“While farmers have built a lot of storage,” he said, “I don’t think they’ve built enough to offset the grain we’re going to raise this year.
“This, coupled with carry-over grain farmers haven’t yet taken to market, will in some cases be the basis for problems at affected elevators.”