Traditionally, purchasing farmland has been one of the best investments a farmer can make, but what about when land is $20,000 an acre?! A 74-acre tract of Iowa farmland sold for that amount earlier this month. We want to know what you’re hearing about land prices – are they similar to the ranges mentioned below? Let us know.
It’s hard to believe, but earlier this month, KCCI, a news station in Des Moines, Iowa, ran a story in which it was reported that a 74-acre parcel of farmland sold for $20,000 per acre, and it wasn’t sold for development. In the article, Mike Duffy, an Iowa State University economics professor and Director of the Beginning Farmer Center, said, “You know we’ve been hearing some high ones, but that was a real high one. That’s an area (Sioux County) where we still have a lot of livestock and the livestock sector has been doing well, so it’s a combination of factors. They’re good sound farmers up there.”
But are they good enough to recoup the value from a purchase of that magnitude?
Land is a good investment, says Duffy, especially if you’re paying cash. Still, it’s difficult to put a dollar amount on what a farmer can either buy or finance land for and turn a profit right away. There are many variables like input costs (labor and fuel), machinery, debt-to-equity ratios, and don’t forget, government programs. Who knows how support programs will be affected in the next Farm Bill?
Farmers have had excellent prices in the near-term, and based on land values, anticipate that trend to continue. Surveys released by the Kansas City and Chicago Federal Reserves this fall find that despite a struggling U.S. housing market, agricultural land in their districts is booming. And the run-up in prices may have yet to peak, as witnessed by the Iowa sale.
Land values throughout the country are strong, showing the largest one-year increase in 30 years.
- The Federal Reserves’ surveys reported that Nebraska farmland showed the highest jump ever: it’s selling for 40% more than last year, due in large part to record yields.
- Kansas farmland is selling for more than $3,000 per acre.
- Minnesota farm ground is at near-record rates, showing a 28% increase from last year.
“These higher prices aren’t for development purposes,” said Mike Boehlje, distinguished professor in the Department of Agricultural Economics and Purdue University, in a press release from the University. “Many of the land sales in the Midwest are to farmers rather than outside investors, so it’s farmers bidding against farmers. Not only is land demand strong but also supply is low as few families
are willing to sell. Strong demand with limited supply makes farmland a hot commodity, both for its asset value and the income it can generate.”
High farmland prices bring up an important factor – what about young farmers? How can they even attempt to enter farming with these phenomenal land prices? It’s an issue Duffy deals with regularly. “I think this is one of the things I do working with beginning farmers, it makes it a little more difficult for them,” he says.
We want to know about land prices in your area – send us a post and tell us what you’re hearing. Case IH is committed to helping farmers Be Ready to meet the needs of a growing world population, and along with new, innovative equipment and other new technologies, we need productive land and highly skilled farmers, like you, to manage and farm it.
For a comprehensive report on farmland values past and present, read Matthew Wilde’s three-part article online at the wcfcourier.com. It focuses primarily on Iowa, but it provides an excellent overview of how we’ve reached the point we are today with land prices.