The average price per acre in Winneshiek County increased 28 percent over the past year, according to Iowa State University Extension and Outreach's annual farmland values survey released last week.

The average price per acre in the county for 2012 was $7,354, up from $5,737 last year.

Statewide, the average Iowa farmland value is estimated to be $8,296 per acre, an increase of 23.7 percent from 2011. This is the third year in a row values have increased more than 15 percent. The 2012 values are historic peaks, the report said.

"The 2012 land value survey covers one of the most remarkable years in Iowa land value history," said Mike Duffy, Iowa State University economics professor and extension farm management economist who conducts the survey. "This is the highest state value recorded by the survey, and the first time county averages have reached levels over $10,000. While this is an interesting time, there is considerable uncertainty surrounding future land values."

O'Brien County had an estimated $12,862 average value, the highest average county value. O'Brien County also had the highest percentage increase and highest dollar increase in value, 35.2 percent and $3,348, respectively. Osceola, Dickinson and Lyon counties also saw 35.2 percent increases. The Northwest Crop Reporting District, which includes all four counties, reported the highest land values at $12,890, an increase of $3,241 (33.6 percent) from 2011.

Northeast Iowa counties

In the Northeast Iowa counties surrounding Winneshiek County, Fayette County had the highest average value per acre in 2012. Fayette County land prices increased from $6,748 to $8,652. Chickasaw County increased from $6,368 to $8,202, Howard, $5,730 to $7,380, Allamakee from $4,474 to $5,705 and Clayton from $5,914 to $7,542.



Causes

Duffy said understanding some of the causes for the current increase in farmland values is helpful in assessing the situation. Farmland values are highly correlated with farm income. As farm income increases, so will land values, he said.

In 2005, corn prices averaged $1.94 per bushel in Iowa. The preliminary estimated price for November 2012 is $6.80. Soybean prices changed from $5.54 to $13.70 over the same period.

"Coming into 2012 there was a general sentiment that prices would decline from their peaks.  But, the drought changed this and the prices remained at high levels. How long the high prices will last is unknown," Duffy said. 

The increase in income has been the primary cause for the increase in farmland values, but not the only one The Iowa State economist said.

"There are other causes for the increase," Duffy said. "Interest rates are at the lowest level in recent memory. Farmland purchased by investors went from 18 percent in 1989 to 39 percent of purchases in 2005, but investor purchases are back to the 1989 level of 18 percent this year after decreasing for the third year in a row."

Another key component is the costs of production. In the past, costs have risen in response to higher commodity prices. This is especially true for rents. Iowa State University estimated costs of crop production have shown a 61 percent increase in the cost per bushel since 2005. Without land, the increase has been 87 percent.

While land values have increased 64 percent in the past three years, in 2009 values did decrease by 2.2 percent, Duffy said. The economist said there are several key factors to watch that influence land values:

• Weather related problems - both here and around the world

• Government policies - especially policies related to estate and capital gains tax rates

• The amount of debt incurred with land acquisition

• What happens to input costs - land being the residual claimant to any excess profits in agriculture

• Government monetary policies as they relate to inflation and interest rates

• The performance of the U.S. economy and economies throughout the world - which impact commodity prices, which in turn impact land values.



2012 Iowa land values

While the highest county land values were reported in O'Brien County, Decatur County remained the lowest reported land value, $3,242 per acre, and the lowest dollar increase, $521. Keokuk and Washington counties had the lowest percentage increase, 14.8 percent, with reported average values of $6,330 and $8,226, respectively.

Low grade land in the state averaged $5,119 per acre and showed a 20.2 percent increase or $862 per acre, while medium grade land averaged $7,773 per acre; high grade land averaged $10,181 per acre.

The lowest land value was estimated in the South Central Crop Reporting District, $4,308, while the lowest percentage increase was in the Southeast Crop Reporting District with an 8.2 percent increase.

The Northwest Crop Reporting District reported a 36.8 percent increase, the highest district average percentage reported. Maps showing 2012 values, percentage change and comparisons to 2011 data and additional information from Duffy are available at extension.iastate.edu/topic/landvalue.