May 22, 2009

Iowa's corn and soy farmland values dropped an average of 7 percent between January and April, the second consecutive quarterly decline, according to the Federal Reserve Bank of Chicago (FRB).

The first-quarter drop follows a decline of 6 percent in the fourth quarter of 2008. It also tracks a 7.6 percent decline in average farm values in Iowa between September 2008 and March of this year reported by the Iowa Farm and Land Chapter of Realtors.

According to the Iowa Realtors' report in March, average land values in the state stood at US$5,619 per acre for highest quality land; US$4,528 for medium quality acres and US$3,536 for lowest quality land.

FRB economist David Oppedahl write in the report that the number of farms and the acreage sold, and the amount of farmland for sale were all below the levels of the prior year.

Farmland values in Iowa and most of the Midwest had increased steadily since 1999, with values in Iowa doubling from 2001 through the first half of last year, mostly on strength of demand for corn from ethanol and for both corn and soy exports.

After peaking at record levels of US$8 per bushel for corn and US$16 per bushel for soy last July, grain prices dropped by more than 50 percent through harvest time last year. At the same time input costs, most notably fertiliser, have remained high.

Corn and soy prices have rallied in the last month primarily on news of short crops in Argentina and Brazil and heavy purchases of soy by China.

Corn prices have risen from US$3.50 per bushel to US$4.20 this week on the Chicago Board of Trade (CBOT), while soy prices have gained more than US$2 per bushel in the last two months and opened at US$11.68 per bushel Thursday (May 21).