Land Price Growth Slows

Des Moines Register:

Farmland values in the Midwest inched higher during the fourth quarter of 2013, the Federal Reserve Bank said Thursday, even though the value of acreage in once-booming Iowa posted a small decline.
The Federal Reserve’s Chicago branch said the average dollar value of “good” farmland across Iowa was down 1 percent for the Oct. 1 to Jan. 1 period. For the year, land prices in the state fell 2 percent. The decline indicates that the torrid growth of the past few years may be coming to an end as commodity prices have fallen, reducing income that farmers used to invest in land and other purchases.
Chad Hart, an economics professor at Iowa State University, said as farmers see their income decline from lower crop prices, the amount of money they can make from the land also falls, pushing down acreage values.
“What the Chicago Fed found is a harbinger of things to come,” Hart said. “We’ll likely see lower farm values tied to those lower farm incomes that we’re going to experience in the next year to year and a half.”
Some areas in the Seventh Federal Reserve District saw declines in farmland values, said David Oppedahl, a business economist at the Federal Reserve Bank of Chicago.
“Combined with expectations of diminished farmland purchases by farmers in 2014, these survey responses cast a pall over the spectacular growth in agricultural land values of the past few years,” Oppedahl said.....
The average price for Iowa farmland rose to an all-time high of about $8,716 per acre in 2013, the fourth consecutive year that prices rose, according to an Iowa State University survey. But the survey showed signs that land values might have peaked in some parts of Iowa, with prices in the northwestern part of the state actually declining from the prior year.....
Similar to what happened in Iowa, land prices across states covered by the Federal Reserve Bank of Chicago have posted sharp gains over the last year few years, but posted mixed results during the fourth quarter. Indiana and Illinois rose 6 percent and 3 percent, respectively, but Wisconsin fell 1 percent. Michigan did not have a sufficient response to determine its change in the value of good farmland. Overall, the region overseen by the Chicago Fed was up 3 percent for the quarter and 5 percent during 2013.
The 5 percent increase in “good” farmland values for 2013 was the smallest gain since 2009 and the second-lowest gain of the past decade.

I would anticipate a gradual decline over the next six to twelve months.  After that, it's all going to depend on where crop prices go. If crop prices continue to trend downward, we'll see an accelerated decline in land prices.  If crop prices drop significantly, things will get real ugly real quick.