If you’ve been to a land auction lately, I don’t need to tell you that prices are up…way up. A recent farmland sale in Iowa fetched $20,000 an acre. The buyer? A neighboring farmer.
We’re now at historic levels. According to a recent survey by Iowa State University’s Extension Service, average Iowa farmland value is estimated to be $6,708 per acre, an increase of 32.5 percent from 2010.
Mike Duffy, Iowa State University economist, says examining some of the causes for the current increase in farmland values and the reactions is helpful in assessing the situation. Farmland values are highly correlated with gross farm income. As gross farm income increases, so will land values. In 2005, corn prices averaged $1.94 per bushel in Iowa. The preliminary estimated price for November 2011 is $6.05. Soybean prices changed from $5.54 to $11.40 over the same period.
Net farm income has increased, and “has been the primary cause for the increase in farmland values, but not the only one,” Duffy says. Other reasons include low interest rates and investors looking for alternatives to the stock market for placing investments.
It’s simply eye-popping numbers that we’re seeing for farmland. And this is bound to have an impact on all agricultural input costs, including machinery. That will put a premium on good, clean, well-maintained used equipment.
So, how has increased land prices impacted your operation?