Midwest farmland prices increased an average of 16% in 2007, according to the Chicago Federal Reserve Bank’s annual survey of agricultural lenders. The 7th Federal Reserve District that is based in Chicago consists of all of Iowa and half or more of four other states: Michigan, Wisconsin
, Indiana, and Illinois.
According to the 265 surveys that were returned by agricultural bankers in this district, farmland prices during the last quarter of 2007 rose 6 percent.
Iowa farmland was consistent with that average, also rising 6% during the quarter. Iowa is divided into five areas by the Chicago Federal Reserve Bank for reporting purposes. The area encompassing most of north and west-central Iowa reported a 24 percent gain over calendar 2007. The area of western Iowa adjoining South Dakota and Nebraska, from the Minnesota border to the Missouri border, increased 20 percent over the same time frame. Rounding out the five zones are the three zones made up of south-central, eastern, and northeastern Iowa at 19 percent, 15 percent and 14 percent.
Section 1031 exchanges are slipping out of the blame for higher land values, and with good reason. Cash corn prices in December were 25 percent higher than December of 2006, and cash soybean prices showed an even greater jump at 62 percent higher. Ethanol, bio-diesel, and increased demand from China and India are the leading blame-getters these days, not tax-deferred exchanges.
Fifty-six percent of the survey respondents (remember, these are agricultural lenders) said that they expect farmland prices to continue their pace of increase into the first quarter of 2008. A scant 2 percent expect land values to decrease, and 42 percent anticipate prices to remain the same from January to March. Since we are already into March, it looks like a pretty safe bet that we are not going to see that decrease the wacky 2 percent expected.
Ken Tharp
Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.
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Copyright © 2008 By Ken Tharp, All Rights Reserved. * Midwest Farmland Prices Increased an Average of 16% in 2007 * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.
Jason - I agree--nobody knows for sure. Every indication (in my opinion, at least) is that there is continued pressure on values to rise, but there clearly is a top somewhere. I think the term I would use here is that I am "cautiously optimistic" about further increases.
By the way, sorry I couldn't say good-bye personally on Sunday. It was all I had to get down there and pick up my stuff. I spent the entire remainder of the day in bed. Doing better now, but I managed to infect my wife and daughter, so now they're going through it. I had a great time with you guys at the classic, and it was fantastic to finally meet you. Wish I could've spent more time there.
My apologies to all other AR readers for the personal comments...
Ken Tharp, Iowa Equity Exchange
Jason - I got in and out of there pretty quick, believe me. I think I was back at home in bed about 45 minutes after I left.
You're right, this is one of the AR success stories for sure. It's showing me the power of networking in a big way. Sometime remind me to tell you what happened after you and I talked today. The password (for my brain to remember, that is) is "St. Louis."
Ken Tharp, Iowa Equity Exchange
Brian - Thanks for your comment on my blog. I don't follow CNBC. I think you would be hard-pressed to find anyone who thinks that land prices are going to continue increasing in double digits annually into the distant future. Does that mean there's going to be a bubble that bursts? That implies that there will be a crash; I think there's more doubt about that.
Is there an end to the high increases? Almost for sure there will be an end sometime. When that occurs is anybody's guess. My other blogs have addressed the arguments for and against an end to increases.
Thanks again for your comment.
Ken Tharp, Iowa Equity Exchange