How much is your farmland worth?
Every farmer should have some idea of what their farmland is worth.
Whether they are looking to sell their land in the near future, somewhere down the road or even if they have no intention at all of selling at this time, they should be able to answer the question: What’s my farm worth?
But how do you go about answering that question. Well, there are many factors to consider when exploring the value of farmland.
Let’s start with the basics.
Take a look at statewide land values
It is helpful to start any search for the value of your farmland with a quick look at how land values are trending in the state of Iowa as a whole.
For this, one of the most useful publicly available resources is the Farmland Value Survey produced throughout the year by Iowa State Extension and Outreach’s Ag Decision Maker publication. It gives a general land value estimate of per acre prices in counties in Iowa, trends in land value, geographical land price relationships and the factors that are positively or negatively affecting the land market across the entire state.
Taking a look at the most recent survey, we can see that the state average price per acre for all quality land in 2020 was estimated to be worth $7,559 per acre as of November 1. Compared to November of 2019, that is an increase of $127 per acre or a 1.7% increase.
What factors are influencing the market?
In general, there are several factors that are always influencing the farmland market in one direction or another. These factors will also have some influence on the value of your land, too.
Those factors include:
- Types of soil
- The percentage of tillable acres
- Location of the land
- Farming practices used on the land
- Yield history
- Soil fertility information
- Current government programs
Of course, there are other factors that can push and pull the markets, including factors that may be out of your control, such as broader economic trends and international trade relations.
Current positive factors
There are numerous current trends affecting the market, according to the Farmland Value Survey.
On the positive end, 26% of respondents listed good interest rates as helping boost farmland value. Limited land supply (17% of respondents mentioned this) and good recent commodity prices (13%) have also supported recent land prices.
On top of that, respondents also listed COVID-related payments, government payments and strong demand from other farmers somewhat frequently.
Current negative factors
Not all was positive in the latest survey, though. More than 10% of respondents listed at least one negative factor in land values.
The top negative factor was lower commodity prices, which shows that certain factors don’t affect all farmers the same way. That was listed by 25% of the folks who responded to the survey.
After that, COVID-19 pandemic uncertainty (12%) and weather uncertainty (10%), such as the derecho that devastated many Iowa farms last summer, were also frequently mentioned.
A few other factors worth noting that have had a negative impact on land values for some survey respondents were political uncertainty due to the 2020 election, poor yields, and broader uncertainty regarding the economy.
What factors may affect your land valuation?
You probably want to know more about your land, specifically. That’s understandable.
The best way to get an accurate depiction of your farmland’s value is to have an appraisal completed.
When having an appraisal done, the appraiser will take a look at many factors and features of your land while evaluating and determining a price point.
Here’s a quick overview of what an appraiser will look at before setting their official appraisal amount.
An appraiser will want to look at how easily a property is accessed. This accessibility is important because it can determine what barriers (equipment costs, fuel costs, etc.) may affect the land value.
For example, the assessor will take a look at whether there are public roads that lead to the land, how far an operator must travel to access the land and if it is landlocked by other properties, which will likely mean easements are in place to access the land.
The appraiser will also want to know who is responsible for maintaining that access. If it is a public road, then that municipality is responsible. Private roads are a different matter and may affect value.
Topography and amenities
Topography is key here. How much of the land is tillable acres and how easily is it farmed due to the makeup of the land? An appraiser factors this into their appraisal.
And, who could forget soil quality? It doesn’t matter if the farmland is flat with excellent drainage if the soil quality isn’t good.
Other amenities an appraiser will keep an eye out for are water access, conservation efforts (such as wetland protection) and other recreation opportunities that may actually increase the land value if they don’t affect farm operation potential.
Configuration and lot size
The general layout is another important factor to consider when appraising farmland. The appraiser will want to see whether the lay of the land allows for easy access, a good amount of tillable acres and a size that doesn’t demand an incredibly high price.
This last point is one to take note of. Properties that are too large may receive a higher appraisal – one that would be too high for some buyers in one transaction. So, you may want to think about how you would subdivide the land into separate lots if selling is in your future.
Midwest Land Management – your farm real estate experts
Want to know how much your farmland is worth? Trust Midwest Land Management – your local farm real estate experts – to give you a solid (and free) real estate evaluation.
Our team understands what factors and market forces are constantly pushing land values up or pulling them down. We also know how to identify and properly evaluate your unique property to give you the most accurate evaluation possible.
Reach out to us and request a free real estate evaluation to learn more.