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Wednesday, May 4, 2016

Area agland value rockets up again; could it be too much, too fast?

Tuesday, September 18, 2007

Agland prices in northwest Iowa continue to climb rapidly, and some experts feel it may be impossible to keep up the pace.

With alternative fuels driving up demand for crops, northwest Iowa agland value has shot up 9.8 percent in the past six months, according to a new survey announced Monday, on top of 17 percent statewide increases over the previous year - all based on the outlook for $4 corn.

Northwest Iowa's fertile black dirt has increased in value at more than twice the rate of the southwest part of the state, and well ahead of the statewide average of 7.1 percent increase.

Land that was valued around $2,300 an acre in 2000 may see bids of $5,000 or more today - one recent sale in the region topped the $6,000 mark.

For landowners, the news, and the times - are heady.

For those who must rent land to farm, or small-operation farmers looking to buy ground to start out or grow, not so much.

"It's absolutely destroying their chances," says Mike Duffy, an agricultural economist at Iowa State University and director of the Beginning Farmer Center. Duffy is encouraging young farmers to find other ways to get started than buying land at today's prices. "But they always want to own land," Duffy says. "That's somehow the badge of being a farmer."

Many are celebrating the surging land prices.

"It represents a huge wealth increase for those who own the land," says Bruce Johnson, an agricultural economist at the University of Nebraska in Lincoln. "It's the hottest real estate market to be in right now."

For much of Iowa, the boom is starting to slow slightly.

"We believe there's still a lot of strength in the market, but that maybe it's slowing down a little bit," said Troy Louwagie, a trends and values chairman with the Realtors Land Institute.

Northwest Iowa is continuing to race ahead in values, because in addition to ethanol and biodiesel demand near at hand, large livestock operations are also continuing to compete to gain acres. "They need the land so that they can spread the manure," he said.

County supervisors have been dealing with a couple of large livestock development plans in recent weeks, as well as rapid expansion by Rembrandt Enterprises chicken-and-egg operations.

The double-digit agland increases may raise concern that Iowa is repeating a mistake from the 1970s, when agland value increased rapidly, leading to a collapse and crisis in the 1980s. According to economist Duffy, current increases are dramatic, but not even close to the 30 percent growth levels that marked the 1973-75 years.

"This is a whole new world we are looking at," Duffy said. "We're moving from an era of government farm program payments being the supporter of the land market and moving into the era of ethanol being the supporter."

While the survey showed that there was still a significant appetite for farmland, the increase was about 6 percentage points lower than the previous six month period, from September 2006 until March 2007. Louwagie said he wasn't sure how long farm property prices would continue to increase, but he didn't think the current pace was sustainable.

"I still believe we'll drop back to our more consistent 3 to 5 percent growth ..." he said. "I have a hard time believing we can keep up this pace."

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