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Farm sales keep topping the charts

By Staff | Nov 1, 2012



Within the past few weeks farmland sales made headlines as the dash for more tillable acres has spurred buyers to pay more than the average value of surrounding farms.

During October a record farmland sale was set in Sioux County when bidders launched an auction selling prime acres that fetched a final $21,900 per acre; another in Wright County saw a sale for $10,600 per acre and a third in Taylor County saw 860 acres in a variety of tillable and recreation acres sell for an average of $3,666 per acre, about $700 per acre over the average for low-tillable land.

Sales like these keep pushing the average price for farm land upward. Some observers are fearing the bubble is about to burst with the price of corn expected to fall soon during to the dwindling demand on the nation’s total supply. Other observers see prices continuing upward, at least in the near future.

In December 2011, ISU issued its annual land value survey showing Iowa farmland was averaging $6,700, a jump of 32.4 percent over 2010.

Then in March 2012, the Iowa Farm and Land No. 2 Realtors Land Institute said farm land had jumped shows values rose 23.7 percent since March 2011.

In September, that number was revised seeing another 18.5 percent increase since September 2011 to an average of $7,900 statewide.

Kyle Hansen, who led the institute’s survey committee, said much of the increase in demand has come since July, when the severe drought became apparent in Iowa and much of the Midwest.

The rate of ag land pricing, said David Miller, a Farm Bureau economist, is an indication of farmers’ positive future outlook.

“While the new record $21,900 per acre sale in Sioux County is not typical,” Miller said, ‘it is a reflection of optimism in the economic strength of farming in Iowa.”

At a time when many parts of the country are struggling to climb out of a recession, Iowa’s continued strong agricultural sector has provided a buffer which has helped much of the state keep a lower unemployment rate than the national average and provided financial sector vigor, Miller said.

Despite drought-squeezed yields in many parts of the state, the price of farmland may continue its climb because multi-generational farm families are working together, pooling their resources and betting on a strong future for the next generation.

“It’s about the continuation of relatively-low interest rates which translate into high capitalization rates for farmland,” Miller said, who is director of research and commodity services for the Iowa Farm Bureau Federation.”Seven dollar corn, $15 soybeans and 2 percent or less 10-year interest rates, all work together to push up the value of Iowa farmland.”

While Iowa is unlikely to see many repeats of $21,000 per acre sales, the state’s farmers are likely to see farmland values continue to rise.

“In general, there’s no indication that Iowa land has topped out yet,” Miller said. “We’re likely to see good farmland, and I’m talking about the $8,000 to $11,000 per acre range, go up another 5 to 7 percent on a year-to-year basis.”

There are many factors that influence farmland values, and sometimes those factors are thousands of miles away.

“Weather problems are creeping into Argentina and Brazilian crops,” Miller said. “So if crop prospects in South America deteriorate again like last year, that’s another element that would support these higher-than-normal prices for another six months to a year.

“Out-of-state investors who show up at these farm auctions will also drive up prices for Iowa farmers, who have been saving and working for generations to buy land and bring their children into farming.

“But, capital asset pricing is all about pricing future expectations; $21,000 an acre at an auction means that at least two bidders were pretty optimistic about the future.”

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