Subsidies, improved trade and prices buoy Iowa farmland values in 2020

Donnelle Eller
Des Moines Register

Iowa farmland values climbed nearly 2% this year, despite the COVID-19 pandemic that disrupted demand for the state’s farm goods and a hurricane-force derecho that damaged millions of acres of corn and soybeans.

Iowa State University, in a Tuesday report on an annual survey, said the average price of farmland had climbed 1.7% to $7,559 from $7,432 an acre last year. The most expensive farmland was in Scott County in eastern Iowa, averaging $10,659 an acre, the survey showed.

The survey showed that land values increased in 78 of Iowa’s 99 counties.

Low interest rates, strong demand for land and substantial government payments to shore up agriculture “helped stabilize Iowa’s farmland market in a year in which Iowa’s farmers faced the destructive onslaught of a derecho, significant uncertainties in U.S. agricultural trade, and a pandemic that significantly altered market demand,” the report said.

“The land market faced downward pressure initially with the onset of the COVID-19 pandemic, which lowered food demand and resulted in declines in livestock and ethanol prices,” said Wendong Zhang, an assistant ISU economics professor.

But improved trade at the end of the year helped boost prices for corn, soybean, pork and cattle, Zhang said.

“China’s efforts to rebuild its hog herd ramped up demand for feed grains,” he said, adding that country remains “at least 10%-15% short of its regular hog inventory.

“So farmers should continue seeing increased feed grain demand,” he said.

Additionally, Germany, a key competitor of the U.S. in pork exports, is now battling with African swine fever, the same disease that decimated China’s hog industry and drove the increase of its purchases of U.S. hogs, Zhang said.

Government payments this year that were designed to help farmers weather losses from market disruptions tied to the coronavirus helped the farmland market “in a big way,” Zhang said.

Altogether, those payments made up 39% of the $119.6 billion in U.S. farm income. The $46.5 billion in government subsidies more than doubles payments provided last year.

The 2020 survey is based on 707 usable responses from 484 agricultural professionals. Sixty-seven percent of the 484 respondents answered the survey online.

Denny Friest harvests corn from a field that was partially hit by the Aug. 10 derecho on Sept. 22 in Hardin County. The harvest is taking him twice as long in derecho hit fields because he can only run the combine in one direction to pick up the flattened corn stalks.
Denny Friest harvests corn that was partially hit by the Aug. 10 derecho in Hardin County.
Denny Friest climbs of his combine for a lunch break as he harvests corn from a field that was partially hit by the Aug. 10 derecho on Sept. 22 in Hardin County.