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Land Prices Hit Record High in Iowa

posted on December 22, 2006


The dawn of the renewable fuels age, which is viewed by some as the most significant development in agriculture since the plow, is fueling both optimism and concern in farm country. Nowhere is that more true than in Iowa, the nation's top producer of corn and soybeans -- and consequently, ethanol and biodiesel.

Corn prices have risen steadily this fall to near-record levels. While that bodes well for growers, it's not exactly good news for livestock producers.

Iowa also leads the nation in hog and egg production, and record national demand for corn-based ethanol is creating a "feed vs. fuel" battle that ultimately could drive food prices higher.

The higher corn prices also are affecting rural property values, which this week were assessed by a leading economist.

 

Land Prices Hit Record High in Iowa

High grain prices, fueled by a rapid growth in ethanol and biodiesel production, are driving land values to an all-time high, according to an annual Farmland Values Survey released this week by Iowa State University.

In Iowa, the statewide average value for an acre of land is pegged at $3,204, an increase of 10 percent over last year.

Michael Duffy, Iowa State University: It's just jumping faster than I've ever seen it."

Michael Duffy, the Iowa State Extension economist who conducts the annual survey said it is the fourth consecutive year that farmland values increased to a record high.

Michael Duffy, Iowa State University: " I think as the full extent of the demand for the corn gets felt throughout the Corn Belt then it will start moving everybody up at the same rate. But right now it's been mostly focused in southern Minnesota, Nebraska and Iowa.

This year's survey also signaled a change in who is buying farmland. According to Duffy, the trend had been towards more investor purchases and fewer farmer purchases. This year, land being purchased by existing farmers rose from 56 to 60 percent, while investor purchases fell from 39 to 35 percent.

Michael Duffy, Iowa State University: "In the past investors were more in it because they were looking for places to put their money. The stock market hadn't been doing very well, the rate of return to farmland was much better than the rate of return in the stock market, so they were able to come in and they looked at land as a good investment."

Based on the survey, the value of Iowa's 32 million acres of farmland is about $105 billion. Higher land prices however are not without a downside. According to the survey, new farmers bought only about 3 percent of land that sold this year.

Michael Duffy, Iowa State University: "It's very much a double edged sword. We have about half of the land in Iowa is rented so if you're renting land there's always a tendency as values go up for rents to follow values and so that means cost of production are going to go up.

 

 


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