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What keeps Iowa farmland values steady?

By Ben Isaacson and Maurie Cashman / Guest Column Corridor Business Journal

 

The demand for food due to population growth and rising standards of living in developing countries is well documented. One measure for this demand is farmland and other agricultural asset values

The grain farmer is in the sixth year of declining commodity prices, but the demand for land ownership has remained strong. The table above compares the decline in commodity prices and land values during the 1980’s (the last major decline in corn and soybean prices) versus more recent times in East Central Iowa.

Corn prices declined 55 percent from 1983 to 1986, which correlated with a 60 percent drop in land values during the 1980s. Similarly, corn prices declined 53 percent from 2012 to 2017, but land values only declined 15 percent.

Why haven’t we had a larger deterioration in land values? A few reasons:

Land is seen as a substitute for a long-term government bond, a hedge against inflation and an asset providing upside to its value. In the end, landowners understand the long-term needs of a growing population demanding higher standards of living and see land as a great part of their portfolio. •

Ben Isaacson is a member-owner of Agri-Management Farm Services LLC and works in all areas of the business.  Maurie Cashman is a member-owner of Agri-Management Farm Services LLC and manages its Aspen Grove Investments brand.