Farmland Price Boom

The prices being paid for midwest commodity-crop farmland continue to skyrocket.

The price of cropland in Indiana has increased 14.5% over the last 12 months.  That’s modest.  South Dakota cropland is up more than 30%  and North Dakota cropland is up a whopping 41.5%.   The price of Nebraska cropland has doubled over the past three years.  The story is the same throughout the grain belt.

In Iowa farmland prices  have increased 265% from 2004 to 2012 (as net farm income skyrocketed 340%).

iowa 49 2003

Throughout the five state district comprised of Iowa, Indiana, Illinois, Michigan and Wisconsin, farmland prices have increased 14% in just the last quarter (July 1, 2013 to October 1, 2013).   In southern Indiana and Illinois prices paid for farmland have increased 21-26%, over the last three months alone.

An article I read in the industrial-ag publication Progressive Farmer mentions a tract in Missouri that changed hands six times in the last 12 months, doubling in price. One person interviewed for the article complained, “Five million dollars won’t buy much these days.”

As Joel Salatin likes to say, “Folks, this ain’t normal.”

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10 comments on “Farmland Price Boom

  1. Jeff says:

    What is the source of the net farm income – ethanol? If so, these speculators are going to be in for a surprise …

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  2. DM says:

    I was talking to my dad yesterday about this stuff. Dad is 81 and still farms 240 acres. (that is a very small farm around here) He said corn prices are less than $5.00 a bushel right now (last year they were over $7.00 and prices (we live in Iowa) has finally stalled. Dad said a few greedy people have made it next to impossible for a young person to get started in farming.. Another related activity in our area is a few people with a lot of money have started buying up timber and land that is too hilly to farm. They are bull dozing these little chunks of ground anyway and planting them into corn and beans. It is a sin. Really it is.

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    • Bill says:

      It really is a shame. It’s nearly impossible for a young person to get a start in farming these days.

      I’ve seen that the corn prices have dropped (but $4-5 still very high by historical standards). There are lots of folks predicting a bust. Those usually follow unsustainable booms. As you know, lots of people have leveraged those high prices and high land values to buy and borrow more. That’s usually a recipe for disaster.

      There are lots of people putting row crops on marginal land, subjecting it to erosion and soil degradation. Subsidized crop insurance creates a peverse incentive to plant there. If the crops come in the prices are high and if they don’t there’s an insurance backstop.

      I’ve read that a lot of the buying is from nonresident speculators. Some farmers are selling their farms then leasing them back to continue farming. The buyers sometimes never actually see the land they’re buying.

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  3. shoreacres says:

    The first thing that crossed my mind was the so-called Tech Bubble. I don’t know lickety-split about farming, but I recognize speculation when I see it.

    I just read an article this week about the rush to plow up pastureland and prairie to plant crops. This sort of thing – it seems to me – is a direct result of people who don’t know a thing about best farming practices going into the business. I could mention the design of the new health care system, but I guess I won’t.

    Still, many of the dynamics are the same. Universal health insurance isn’t the same as universal health care, and increasing acreage put into crops doesn’t necessarily guarantee less hunger.

    Greed, inexperience and occasional stupidity can be a lethal combination.

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    • bobraxton says:

      greed is probably sufficient, stand-alone – I remember Before the economy went over the cliff, one year the first quarter I read in the Business section that housing prices had gone up 16% in one quarter. Immediately my response (to self) was this is NOT good news, this is not normal. Same story now with farmland. The forty acres that my great-grandparents (one died 1920, the other 1912) that has not been cultivated since not many years after that – my mother is the owner now and it age 90. Wondering.

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      • Bill says:

        The housing bubble seemed so obvious, but only to a few people. The carnage in Florida was ugly to witness. We were fortunate enough to have seen it coming. We sold our vastly overvalued home there and used the found money to build our house here. But the vast majority of homeowners went down with the ship, often mortgaged to the hilt.

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    • Bill says:

      It reminds me of the housing bubble. Big booms make for big busts. Big busts make for big bailouts.

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  4. TexWisGirl says:

    i knew about the dakotas and the oil biz. the ethanol is interesting…

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