In an article in the Des Moines Sunday Register, author Dan Piller investigates the value of farmland in Iowa based upon the results of a number of recent farm auctions. The conclusion? Farmland values are not rising at the rate they have over the past few years. Probably not a huge revelation to those of us who keep track of things, nor a huge surprise to those of you who don't. The current macro-economic conditions in this country and the world affect farm prices just as they touch virtually every other aspect of our lives.
However, the good news is that while prices may not be increasing at the breakneck speed they once did, 
they are not necessarily falling, either. The article quotes prominent Iowa State University economist and all-around farmland guru Michael Duffy as follows: "What we're probably seeing now is a plateauing, rather than a fallback in land prices. When people say prices are down, it probably is reliatve to what they expected two or three months ago" Another prominent farmland figure, Randy Hertz of Hertz Farm Management, puts it this way: "We're not seeing a pullback in land prices by any means, but the growth in land prices may have slowed."
While land owners feel the uncertainty that nearly all Americans feel right now, most are not concerned about a collapse such as the one that occurred in the 1980's. Land values rose at a hyper rate back then, too, but those purchases were oftenmade with bank loans. In a similar fashion to what is now occurring in the mortgage meltdown, farmers got upside-down on their farms when values dropped and were unable to generate the cash to make the payments. In today's farm economy, land owners are either purchasing new land with cash or with limited leverage, offering them a much greater probability of weathering future storms.
I welcome your comments on land values. Please let me know what you are thinking or wondering.
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Ken Tharp
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Copyright © 2008 By Ken Tharp, All Rights Reserved. * Farmland prices leveling off? * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.
Ken, I'm still wondering about ethanol. Will the government continue to support it's production or will other energy programs push it aside. Iowa farm land prices have been the beneficiary of the ethanol program. Maybe a rolllback is coming.
Bill Roberts
Bill - Thanks, as always, for stopping by. Good question... I think that the answer depends upon how much influence the production of ethanol has had on the price of corn and other commodities. There are certainly other factors that impact those prices, too. If the preponderance of the impact is from ethanol and ethanol productions slows down or is surpassed by another technology, it certainly could have a negative affect on land prices. My personal opinion is that there are enough other factors that play into the price of land that a negative impact from a reduction in ethanol production (assuming there is one) might not be too much of a drag on things. Just a wild guess, though...
- Ken