Iowa State survey shows longevity in farm ownership
By Amy H. Peterson
Iowa State University economist Wendong Zhang conducted a survey on ownership of Iowa’s 30 million acres of farmland. The survey, presented at the university by Dr. Zhang and Dr. Alejandro Plastina, assistant professors of economics, showed the latest data in the continuum of the survey, which began in 1949.
Plastina said, “It is statistically representative of all owners and all land in Iowa.”
Plastina said the telephone survey results in a collection of widely used data and, “the best available information.”
The survey is mandated by Iowa Code to be conducted every five years.
Zhang found much of the land does not change hands very often.
“About 22 percent of the land is owned in the structure of sole ownership. Another 28 percent is owned in joint tenancy – which is often between a spouse, husband and wife – and eight percent are tenants in common or other sorts of co-ownership structure,” Zhang explained. Zhang said the co-ownership is often among siblings. Twenty percent of the farmland is owned by a trust, with many of them what are called revocable trusts, which means the ownership can be changed.
“Typically they last for the lifetime of the owner who set it upand the beneficiary tends to be the kids or grandkids of the current owner. So, it’s mainly used for the tax planning, estate planning or transition planing purposes,” according to Zhang. Zhang said ten percent of the farmland is held in corporations that include families and are also used for tax planning purposes.
Since 1982 the use of trusts has increased significantly, Zhang said.
“Sole owners and joint tenancy are the only two ownership models declining. So over time, there’s a gradual movement away from more individual ownership, especially sole owners, to a more institutionalized ownership in terms of trusts and corporations,” Zhang said.
One economic driver is the fact that most of the land is debt free. Eighty-two percent of owners have paid off the land.
“Farm income has declined by almost half the 2013 peak, but the farmland values have only declined about 15 percent,” Zhang said.
One reason for this is a lot of the owners have no debt, so they are not in a position to sell their land.
The survey found 20 percent of the farmland was owned by the same person for at least 40 years and more than half (55 percent) of the land was owned by the same person for more than 20 years. That level of stability increases land values.
“Farmland tends to be a long-term investment, not a whole lot of people are flipping farmland, so you see a very low turnover and the limited turnover tends to support the higher land values,” Zhang said.
For northwest Iowa, the survey found 61 percent of farmland is leased with 17 percent crop share, 82 percent cash rent and 23 percent of that on a flexible cash rent arrangement.
Across the state, 60 percent of land is owned by farmers over the age of 65 with 25 percent by an owner aged 65-74 and 37 percent by an owner 75 or older. Thirteen percent of land is owned by a woman landowner aged 80 or over. Just five percent of Iowa land is owned by farmers below the age of 45 with less than one percent owned by persons age 25 or under.
Zhang said, “The 13 percent of land owned by a woman landowner 80 years old or older means there is a significant share of widowed landowners. The data here is consistent with the share of land we found is rented out, and the share of landowners with no farming experience.”
“The combination of this slice of information has a lot of interesting points about how land it managed, how the ownership is transitioning, and how it is leased out,” Zhang said.
Part of what’s driving this trend, according to Beth Hoffman an Iowa farmer who is also Assistant Professor of Media Studies at the University of San Francisco, is the exorbitant cost of both land and machinery. A John Deere combine can cost as much as $500,000. Even a farmer looking to get in with quality used equipment is faced with an estimated initial investment of at least $600,000 to get started, according to Shawn Williams of Successful Farmer.
For out-of-state landlords, how a potential tenant plans to take care of the land is an essential question for owners in search of renters, according to The New Food Economy.
In the 2012 survey, Extension researchers found 93 percent of landowners said “good land stewardship” was by far the most important tenant quality, above knowing the farmer (52 percent) and renting to a family member (25 percent).
More information about the survey is available on the Iowa State University Extension website.