Des Moines Register
03-21-07
Iowa farmland prices go up 13.6%
Rising corn, soybean values fuel six-month jump
By JERRY PERKINS
REGISTER FARM EDITOR
Riding higher corn and soybean prices, Iowa farmland prices rose 13.6 percent in
the past six months, according to a survey released Tuesday by farm real estate
brokers and appraisers.
Respondents to the survey, which is conducted every six months by the Iowa
Farm and Land Chapter No. 2 Realtors Land Institute, said that increased
commodity prices tied to escalating demand for corn and soybeans from ethanol
and biodiesel plants are fueling the farmland price increase.
The annual rate of increase for the state's best farmland - that which produces
more than 160 bushels of corn an acre - was 16.8 percent, compared with
farmland prices a year ago.
The six-month rate of increase for the best farmland was 14 percent, reflecting
the rapid increases in commodity prices during and after the 2006 harvest.
Troy Louwagie of Hertz Real Estate Services in Mount Vernon, who leads the
survey for the Iowa Farm and Land Chapter, said farmers seeking to expand
their operations have been most the aggressive in bidding up the price of
farmland.
"Investors tend to sit on the sidelines when land gets this high," Louwagie said.
Louwagie said the annual rate of increase for the best Iowa farmland is the
second-highest in 20 years.
In March 1988, he said, the best Iowa farmland rose 20 percent in one year. In
September 1996, it rose 16 percent for the year.
Farmland is an important component of the investment portfolios of many
Iowans, including the heirs of farmers and other landowners.
Half of Iowa's farmland is expected to change ownership in the next 10 to 15
years, according to an Iowa State University study of landownership, as Iowa's
farmers grow older and their heirs decide to sell the land.
Rod Larson, a farmland broker for Farmers National Co. in Webster City, said
most of the farmland sales that he sees are being made by heirs and estates.
The latest run-up in farmland prices might present those heirs with a good
opportunity to sell, he said.
"Good business judgment would put some farms on the market," Larson said.
"This is the most optimism I've seen in 25 years."
Larson said that today's farmland market is different because it is being driven by
demand for corn and soybeans, not by speculation.
Despite the widespread optimism sparked by the renewable-fuels boom in Iowa,
Louwagie said there were negative market factors mentioned by survey
respondents.
Uncertainty over the next farm bill and rising costs of fuel and fertilizer were
mentioned the most by survey respondents, he said.
Land prices follow commodity prices, Louwagie said, and a decline could occur if
corn and soybean prices drop, if interest rates rise, or if government farm
programs are less generous than they have been.
Sam Kain, a farm broker with Farmers National in West Des Moines, said
farmland prices have increased rapidly in the past two months.
"Ethanol has really fueled the increase," Kain said. "If you aren't selling your land
at a public auction, you're leaving money on the table."
Michael Duffy, an ISU economist who conducts the university's annual land
value survey released in December, said the increase was in line with his
expectations.
"Since September, this market has taken off," Duffy said.
A farmland survey of agricultural bankers conducted by the Federal Reserve
Bank of Chicago showed a 13 percent increase in Iowa farmland prices in the
year ended Jan. 1.
Farmland prices rose 7 percent in the fourth quarter of 2006, the Chicago Fed's
survey said.
Farm Editor Jerry Perkins can be reached at (515) 284-8456 or
jperkins@dmreg.com