Farmland to undergo major ownership shift

Jan. 24, 2014

Iowa could see nearly 60 percent of the state’s farmland change hands over the next 20 years, a speaker at the Land Investment Expo in West Des Moines said Friday.

 

That represents nearly $150 billion in value, Ron Beach, a Peoples Co. broker, told a packed room of farmers, landowners and others. Peoples, a Clive-based land management and real estate company, organized the event.

 

Beach said demographics are driving the changes. Nearly 30 percent of the state’s farmland is owned by farmers 65 to 74 years old, and 30 percent is owned by farmers who are 75 years or older.

 

Of those owners, about 70 percent will give their land to their children, Beach said. And 50 to 60 percent of those inheriting the land will sell it.

 

“That creates a tremendous opportunity in agriculture” for farmers, investors and others interested in purchasing land, Beach said.

 

That transfer could represent some lost economic activity for the state, depending on where the heirs are located, said an Iowa State University economist, contacted after the conference.

 

“Increasingly, the heirs to Iowa farmland are scattered,” said economist Dave Swenson. “It could be a relatively healthy fraction of the money.”

 

That reduces the likelihood of those dollars being reinvested in Iowa, Swenson said. “A dollar that stays in Iowa has a chance of bouncing around. A dollar that leaves has a snowball’s chance in hell of finding its way back here.”

 

Altogether, Iowa’s farmland is valued at $267.6 billion.

 

Beach told the group that Iowa land values should remain relatively steady, although declining commodity prices have caused the market to “top out” and likely plateau.

 

He sketched out a scenario where Iowa farmland could push down to about $6,000 an acre, with corn prices hovering around $4.25 a bushel. An Iowa State University land survey in December showed farmland values averaged $8,716 an acre in 2013.

 

Beach said he wasn’t making a prediction, but offering an example of how changing commodity prices and interest rates can shift the fundamentals of farmland values.

 

“That doesn’t happen overnight,” he said. “The whole trend has to stay that way for a while.”