Trends and Determinants of US Farmland Values Since 1910: Evidence from the Iowa Land Value Survey

Valued at 2.31 trillion US dollars in 2016, farm real estate (land and structures) accounted for 85% of total US farm assets; in addition, farm real estate also represents the largest single item in a typical farmer’s investment portfolio. As a result, changes in its values have been a perennial interest to policy-makers, farmers, researchers and investors alike. Focusing on Iowa, a Midwestern state at the heart of the Corn Belt, and using annual data since 1950 from the Iowa Land Value Survey, this article analyses what drives the changes in land values in Iowa and across the Midwest over time from 1910 to 2016, assesses the return and profitability of farmland as an alternative of investment, and also compares the current downturn in US farmland values with the 1920s and 1980s farm crises. There have been three major ‘golden’ eras in US modern agriculture over the last 100 years: 1910 to 1920, 1973 to 1981, and the most recently from 2003 to 2013. The first two ended in a farm crisis, and many worry the third one is in the making. While the declining farm income and land values are alarming, this article argues that it is very unlikely that we will see a replay of 1980s farm crisis or a sudden collapse of US farm sector. The significant farm income accumulation during 2003–13, the stronger government safety net, and historically low interest rates should help agricultural producers withstand the downturn pressures. This article also compares the relative return of investment in Iowa farmland and S&P 500 by taking both the income generation and capital gains of these two assets into consideration. The results show that the investment timing and holding period are key in determining the relative return of the investment.