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Report: Iowa's farmland values saw decline over past six months

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Iowa's farmland values have dropped over the past six months due in part to tariffs affecting commodity prices, according to a new report that surveyed farm appraisers and realtors.

The Iowa chapter of the Realtors Land Institute released Tuesday the findings of a survey, which found the overall farmland value across Iowa dropped by 1.7% between March and September of this year.

Nearly all nine crop regions saw some sort of decline in value with the west central part of the state seeing the sharpest decline at 3.9%. The north central region saw no change and the northeastern part of Iowa saw a .7% increase. The values of the cropland saw an increase between September 2017 and March 2018, leaving a statewide average increase in value of 1.2% over the last year.

The major factors that affect these values are limited land available on the market, increasing interest rates, commodity price levels, world trade agreements and tariffs, the report said. This comes in the midst of an ongoing dispute over trade as the Trump administration tries to re-negotiate trade agreements and levies tariffs against countries like China.

"Tariffs are definitely a disruption," said Kyle Hansen of Hertz Real Estate Services in Nevada. "Anything that affects commodities will affect land prices."

An expert says land value is likely to continue to decline, but that doesn't mean the worst is yet to come.

“We won’t see a sudden collapse of the market because due to the tariffs with China," said Dr. Wendong Zhang, assistant professor of economics at Iowa State University. He is a farm management specialist that looks at land use and land value. Zhang releases a similar land value report every December.

“A replay of the 1980 farm crisis is unlikely," Zhang said.

That's because most Iowa farmers -- 82% -- own their land. This means that don't necessarily have to sell land under any circumstances, which keeps the land available limited and in turn, helps to keep the market steady. Zhang estimates any further decline of land value won't exceed 5%.

As a result, Zhang said, this slight downturn in the market will be seen as "short term pain" for most landowners.

"But if you're relatively young and have a lot of debt, the tariffs, more than likely, will increase the probability of being called into the banks and suggested by the lender to sell [part of your land] to shore up capital," Zhang said.

While land markets might feel little impact, Zhang says some commodity markets could face long-term damage--- even if these trade disputes get resolved---because China could diversify its markets, curtailing the amount of a certain product it imports from the U.S.

He pointed to 2009 trade disputes as an example. In 2009, China retaliated on U.S. exports of chicken feet in response to the Obama administration's tariff on tires.

"After that, they essentially moved $1 billion of chicken feet exports to zero. They essentially knocked out the chicken export market for the U.S.," Zhang said.

And these tariffs have trickle down effects beyond just agriculture.

“[They] not only affects the commodity prices, not only affects agriculture sector. It also affects to revenue the state has and also affects a lot of the public services these revenues support, including higher education," Zhang said.


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