Iowa Farmer Today
12-22-07
Ethanol boosts prices to record
By Gene Lucht, Iowa Farmer Today
AMES --- Fueled by the ethanol boom, Iowa’s farmland values shot up by 22
percent to an all-time high of $3,908 per acre, according to an annual survey by
Iowa State University researchers.
“We continue to set records,” says ISU Extension Farm Economist Mike Duffy,
who conducts the annual survey, which measures difference from Nov. 1 to Nov.
1.
Duffy says this year’s survey showed average land values rising by more than
$700 per acre. Since 2000, land values have more than doubled, rising from
$1,857 to this year’s $3,908 figure.
And, that figure isn’t likely to drop any time soon, Duffy says.
“It’s my general feeling that we’re going to see a strong land market in Iowa for at
least the next five years,” he says, although he adds the rate of growth will likely
slow.
And, while the increase is certainly caused primarily by higher grain prices due to
the biofuels boom, Duffy says it is a classic good-news, bad-news situation for
farmers.
On one side, if they own land, they have seen their net worth climb. The increase
has also been dramatic enough to push more land onto the market as owners
have decided to take advantage of the situation. And, all that has pumped money
into the state’s economy.
On the other side of the spectrum, it means cash rents have also jumped
dramatically. That means both an increased cost of production and a higher
barrier to young farmers who are trying to get into the business or to expand their
operations.
“This is something we’re going to need to watch,” Duffy cautions.
He says some Realtors surveyed were a bit uneasy, because they fear the
increase has been so dramatic there could be a correction.
Duffy doesn’t see any big drop in land values coming soon.
But, the numbers are dramatic, and he says they are more pronounced in Iowa
than in many other farm states because Iowa is at the center of the ethanol and
biodiesel boom.
Five counties now are recording average farmland values of above $5,000 an
acre and 51 more are between the $4,000 and the $5,000 level. Nineteen of the
counties recorded increases of more than 25 percent; 59 had jumps of 20 to 25
percent.
The highest county average price is still in Scott County, with $5,699 per acre;
Decatur County remains the lowest at $1,828 per acre. Sioux County had the
highest dollar increase this year at $1,142 per acre; Floyd County had the largest
percentage increase at 30.3 percent.
Low-grade land in the state averaged $2,655 per acre, an increase of 21 percent
over last year. Medium-grade land averaged $3,666 per acre, a jump of 21.8
percent. And, high grade land averaged $4,686 per acre, a leap of 22.2 percent.
Duffy noted trends, including:
=The increases were not as strong along the traditional river areas because river
transportation wasn’t as big a factor in the increase as was the localized biofuel
usage need.
=More sales were done by auction, perhaps as more sellers sought to take full
advantage of the surging market.
Duffy says many respondents said they thought more purchases were being
made by farmers, but the statistics show the percentage of farmer buyers was
about the same as before. The trend over the years had been toward fewer
farmer buyers.