The value of good farmland in the heart of the Corn Belt rose by one-fourth in the last year, the largest annual increase since 1976, even when adjusted for inflation, the Federal Reserve Bank of Chicago reported yesterday in its monthly AgLetter. The Kansas City Fed, which includes part of the Corn Belt, reported a similar increase in non-irrigated cropland, which it attributed to "robust bidding by farmers." The Chicago Fed said the rise was supported by "an unusual shift up in agricultural prices across the board," particularly for corn and soybeans.
"The year 2011 may go down in the annals of U.S. agriculture as a once-in-a-generation phenomenon," the Chicago Fed said. The KC Fed said local bankers "noted an increasing number of absentee landowners were putting their farms up for sale and attributed much of the auction activity to landowners seeking top-dollar prices. Farmers were the main buyers, and the share of land purchased by farmers has grown during the past few years. Still, outside investor interest in farmland for rental income or capital gains remained high, with farmland sales for recreational or development use dwindling." It said about one-third of bankers in its district (Kansas, Nebraska, Oklahoma, Colorado, Wyoming and parts of Missouri and New Mexico) expected both the price and the amount of farmland offered for sale to rise further in 2012."
Predictions like that are likely to feed fears of a farmland bubble and bust. On Agriculture.com, Multimedia Editor Jeff Caldwell writes, "The current boom will be followed by a bust at some point in the future. There are reasons, though, that this time the cycle's different than it's been in the last few decades." (Read more) And the Loranda Group says "This rapid increase in farmland values has been driven by profits and not speculation," AgriMarketing reports.
The biggest jump in farmland value in the Chicago Fed area was in Iowa, where one tract in the northern part of Region I sold for $20,000 an acre, an unheard-of sum. That is probably an outlier; a local newspaper publisher familiar with the auction told the Institute for Rural Journalism and Community Issues that it turned into a bidding war between two farmers who did not want the other one to have the property. UPDATE: A more recent sale, at just under $10,000 an acre, is more typical. If you're wondering exactly where the Corn Belt is, it's in dark green on this map (yellow numbers are each state's percentage of the national corn crop):
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| Fourth-quarter and 2011 increases by region in Chicago Fed area |
Predictions like that are likely to feed fears of a farmland bubble and bust. On Agriculture.com, Multimedia Editor Jeff Caldwell writes, "The current boom will be followed by a bust at some point in the future. There are reasons, though, that this time the cycle's different than it's been in the last few decades." (Read more) And the Loranda Group says "This rapid increase in farmland values has been driven by profits and not speculation," AgriMarketing reports.
The biggest jump in farmland value in the Chicago Fed area was in Iowa, where one tract in the northern part of Region I sold for $20,000 an acre, an unheard-of sum. That is probably an outlier; a local newspaper publisher familiar with the auction told the Institute for Rural Journalism and Community Issues that it turned into a bidding war between two farmers who did not want the other one to have the property. UPDATE: A more recent sale, at just under $10,000 an acre, is more typical. If you're wondering exactly where the Corn Belt is, it's in dark green on this map (yellow numbers are each state's percentage of the national corn crop):
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