Farmland prices rising, especially around ethanol plants in the Midwest

"Skyrocketing farmland prices, particularly in states like Illinois, Iowa and Nebraska, giddy with the promise of corn-based ethanol, are stirring new optimism among established farmers," reports Monica Davey of The New York Times. "But for younger farmers, already rare in this graying profession, and for small farmers with dreams of expanding and grabbing a piece of the ethanol craze, the news is oddly grim. The higher prices feel out of reach."

Davey reports from DeKalb, Ill., citing an 80-acre tract "that sold for $10,000 an acre at auction this spring, a price that astonished even the auctioneer," Davey writes. "In central Illinois, prime farmland is selling for about $5,000 an acre on average, up from just over $3,000 an acre five years ago, a study showed. In Nebraska, meanwhile, land values rose 17 percent in the first quarter of this year over the same time last year, the swiftest such gain in more than a quarter century."

Davey also writes, "A federal-government analysis of farm real estate values released Friday showed record average-per-acre values across the country. The analysis said property prices averaged $2,160 an acre at the start of 2007, up 14 percent from a year earlier. . . . In Iowa, which produces more corn and is home to more ethanol plants than any other state, farm rental prices are mimicking purchase prices: they were up about 10 percent this spring over a year ago, according to a study by William Edwards, a professor at Iowa State University, who said it was the largest jump since he started tracking farm rents in 1994."

Some of the highest prices are near the nearly 200 existing or proposed ethanol plants, "where the cost of transporting the corn would be the cheapest," Davey reports. Jason Henderson, an economist at the Federal Reserve Bank of Kansas City, told the Times that that land close to such facilities, most of which are in the Midwest, had jumped by as much as 30 percent over a year ago. (Read more)

UPDATE: A Times editorial Aug. 10 says the ethanol boom "gives bigger, richer farmers and outside investors the ability to out-compete their smaller neighbors. It cuts young farmers hoping to get a start out of the equation entirely. It reduces diversity in crops and in farm size." (Read more)