Iowa Farmland Values Dropped 6% In Final Months Of 2008

Iowa farmland values dropped by 6% in the state in the last three months of 2008, the Federal Reserve Bank of Chicago said. The decline in farmland values was the first such drop in a decade, the Des Moines
Register reports.

The Chicago Fed report didn’t put a dollar amount on farm values. But, Iowa’s 6% fourth-quarter land value decline was the largest percentage decrease in the region, which includes Illinois, Wisconsin, Indiana and Michigan.

David Oppedahl, the economist with the Federal Reserve Bank of Chicago who conducted the survey of 209 banks, said farmers would react to declining farm values with less capital spending, most notably on heavy machinery.

Even Deere & Co. said it expects flat agricultural machinery sales this year. Its farm equipment sales had increased by 18% in North America during the fourth quarter of 2008. Iowa’s manufacturing base is tilted heavily toward agriculture, with Deere & Co. and its 12,000 workers leading a roster of heavy equipment manufacturers that includes Vermeer of Pella, Art’s-Way of Armstrong, Kinze Manufacturing of
Williamsburg and the Firestone agriculture tire factory in Des Moines.

Jim Knuth, V.P. of Farm Credit Service of America in Iowa, said a continued deterioration in farmland prices would also make farmland harder to buy. In turn, lenders might increase the down payment they require for land purchases from the current average of 35% of the appraised value to 40% or 45%.

Mike Duffy of Iowa State University, who annually surveys farmland prices, said 80% of farmland sold in Iowa has been bought by neighboring farmers, a trend that may change if farmland values decline.

Iowa State University reported a 14% increase, to $4,468 per acre, in average farmland values from Nov. 1, 2007, to Nov. 1, 2008. Duffy and Knuth both said they had noticed that farmland prices were softening toward the end of last year.