A local auction has produced what is believed to be a new all-time record price for agricultural land in Buena Vista County.
On Wednesday, Bay Breeze LLC (Jim Bauer) purchased a parcel of famland between Alta and Storm Lake, north of Lake Creek, from Phillip Pitzen Jr. for $14,800/acre. Another parcel was purchased at $13,900 - making the average $14,350/acre for the 160-acre area, which adjoins land already owned by the buyer. Plans are to keep the land in crop production.
According to the Milford agent who brokered the sale, it was the highest price for farmland that he has seen in his career.
"It was a competitive auction, which stands to drive the price up," he said. "There was a good crowd, but only three or four serious bidders."
Dennis Reyman of Stalcup Ag Services in Storm Lake, who tracks northwest Iowa agland sales and often writes about the trends they represent, said it is the highest price per acre he is aware of in county history - a peak in the rapid, constant rise in farmland prices in the past few years."
"We just had some hilly stuff near Mapleton sell for $10,800 - I'd rather see these kind of numbers on our flat black," he said.
The record may not stand long, as Stalcup sold a farm near Royal Tuesday for $14,000 an acre. "That wasn't even a surprise anymore, it's about what they expected."
How fast is farmland value exploding? According to Iowa State University experts, in 2004, the average land sale in Buena Vista County was barely over $3,000 and acre. The average has increased as much as 24 percent in a single year since then.
Ethanol's demand for corn has played a major role in the increases, but the land agent on the record-setting sale says there are several factors creating a perfect storm. "There's just not a lot of land available in the Storm Lake area, and we still have willing buyers looking to purchase. Crop prices are strong right now, and it's all just a matter of supply and demand dynamics."
Reyman doesn't see an end to the historic increases any time soon.
"I think it will continue, depending on the normal factors - grain prices, income level and interest rates," he said. "I don't think it will really back down. We could raise a huge crop and corn could go back to four bucks, but if land prices soften, some people just won't sell. A lot of people who were considering selling pulled the trigger in 2012, so there will probably be less local land on the market this year."
He doesn't foresee a balloon popping on the agland market as was the case with rapidly inflating housing and tech stock markets, because "lenders aren't sticking their necks out." Unlike the 1980s, they are making sure buyers can put cash down and that expected markets for farmers' products will allow them to repay loans.