What is in this article?:
- Farmland sales continue to attract attention from farmers and economists
- A month ago, an 80.47-acre tract of land in Iowa sold for $21,900 per acre.
- Larger tracts have sold for an average of $8,000-plus with some parcels going for more than $11,000.
- Will this year's rise continue or will declining market prices put a damper on the farm real estate market?
In recent weeks, we have seen a flurry of reports of record or near-record cropland prices across the Corn Belt.
On Oct. 25, an 80.47-acre tract of land in Iowa sold for $21,900 per acre. Earlier in that week, another parcel of prime Iowa farmland sold for $19,100 per acre.
In Nebraska, 1,855 acres were sold on Nov. 8 for $15.13 million or an average of $8,156.33 per acre with some parcels selling in excess of $11,000 per acre.
North Dakota saw an 80-acre parcel of sugar beet and potato farmland going for $800,000 or $10,000 an acre; it too was sold on Nov. 8.
This past week, Drovers Cattle Network reported Indiana and Ohio land sales ranging from $5,817 per acre to $11,194 per acre.
A Corn and Soybean Digest article reported, “Iowa farmland prices have risen steadily in recent years. The value of tillable land jumped an average of 7.7 percent in the state over the past six months, according to a recent farmland survey released by the Iowa Farm & Land Chapter No. 2 Realtors Land Institute. The value of Iowa cropland for potential corn production increased nearly 21.9 percent over the 12 months ended in September, according to the survey.”
“North Dakota farmland values rose an average of 14 percent in 2011, according to a survey by the North Dakota Chapter of the American Society of Farm Managers and Rural Appraisers,” reported a Nov. 9 article in Prairie Business.
According to Farm and Dairy, “data from the Oho Ag Statistics Service shows an increase of 13.6 percent for bare cropland in Ohio for 2012.”
The same article said, “the Chicago Federal Reserve Bank and Purdue University both conducted surveys in June 2012 and found that cropland values in Indiana had appreciated 10 percent to18.1 percent from one year ago.”
But it doesn’t stop there. According to a Business Week online article by Alan Bjerga, the increase in farmland prices does not stop at the US northern border; “the promise of a Canadian Corn Belt has helped push farmland values nationwide up 27 percent from 2007 to 2011, to $1,610 an acre…. The northward creep of the Corn Belt is turning Canadian farmland into a long-term investment play on global warming, says Tom Eisenhauer, president of Ottawa-based Bonnefield, a farmland investment firm that owns 15,000 acres across the country.”
In some cases in both the US and Canada, those paying these prices are neighboring farmers while in others it is people looking at farmland as an investment. In either situation, the factors driving the willingness to pay higher prices are similar:
High crop prices,
Low interest rates that make investments in bonds unattractive and the taking on of farmland mortgages at these prices possible,
A possible increase in taxes on long-term capital gains in the US provides incentives for land holders to sell land, and
Federal Crop Insurance which can provide stable returns in the case of low prices or production problems.
In addition, high prices have provided some farmers with the cash that they need to continue investing in the purchase of additional acreage.
For US northern tier and southern Canadian farmland, global warming and the introduction of new short-season corn varieties that yield well has allowed high-priced, higher-yielding corn production to supplant the growing of wheat and other small grains.