Tuesday, January 10, 2012

The farmland boom is centered in rural Iowa

Sioux County, Iowa, where land prices have more than tripled since 2000, is the epicenter of the farmland boom. Many look to the county as a benchmark because record-setting deals there become the new mark to reach elsewherereports P.J. Huffstutter of Reuters. However, residents fear the boom may turn to bust and that people will trace the downfall to the 768-square-mile county, blaming farmers and investors for it.

Auction bidders in Sioux County (Wikipedia map) shelled out $13,000 an acre two years ago; this year, they hit $20,000 an acre. It may take farmers years to recoup that money because future estimates of crop prices don't match up to land prices. In neighboring states the phenomenon in which land values are influenced by a single auction is known as the "Iowa effect." Huffstutter reports values can "fluctuate wildly depending on who is doing the math and what income and expense factors are used."

There's also a human factor driving prices up, experts tell Huffstutter: "Extreme high-priced deals are often driven by a regional culture of competitiveness." Still, many think there's "life left in the local boom." The town of Hull, population 2,200, recently bought an 80-acre piece of land for $1 million. Now, dairy farmers are renting the land after a cheese plant announced it would double its milk production. Huffstutter reports local real-estate agents estimated the parcel is now worth $19,000 an acre. (Read more)

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