DES MOINES, Iowa — Fourth-generation corn and soybean farmer Jeff Frank doesn’t feel wealthy, but simply based on the skyrocketing value of his land in northwest Iowa, it’s an apt way to describe him, even if he Laugh at this thought.
He lives in the same century-old house, grows vegetables in the family garden and shops at the same grocery store about 15 miles (24 kilometers) down the road. “We live as we live our whole lives,” he said.
Yet, even though Frank’s life hasn’t changed, his owner of several hundred acres about 80 miles (129 kilometers) northwest of Des Moines has suddenly made him millions of dollars.
To city dwellers excited by their home values, it may come as a surprise that countless farmers like Frank are actually experiencing a real estate boom that is lower than residential prices. While average current home prices in the US increased by 15.8% last year, agricultural prices in places like Iowa nearly doubled that rate.
“I’m certainly surprised by the magnitude,” said Wendong Zhang, an economist at Iowa State University who oversees the annual Agricultural Price Survey.
Rising prices, especially in the Midwest, are due to paying higher prices for key commodity crops such as corn and soybeans, with plentiful harvests in recent years at low interest rates and optimism that the good times will continue.
But they are a mixed blessing. They are enriching farmers who already have a lot of land, but making it difficult for small operators or small farmers to get land unless they inherit it.
Most of the purchases are by operations that see massive value, seizing the opportunity to buy nearby land.
“If you miss this opportunity, you may not get a second chance,” Zhang said, describing the current mood.
For consumers, higher land costs usually do not affect grocery prices.
Historically, agricultural land values have risen and fallen, but they have mostly risen over the past few decades, and they have risen substantially over the past year—33% for the state’s share of the franc and 29% for Iowa as a whole, the country. One of the top agricultural states of. Agricultural prices have also risen elsewhere in the Midwest and climbed in most other parts of the country.
Federal Reserve banks in Chicago and Kansas City posted double-digit growth in Illinois, Wisconsin, Indiana, Missouri and Nebraska.
In Iowa, average agricultural land has increased from $7,559 per acre in 2020 to $9,751 per acre in 2021.
Nationally, agricultural land averaged 7%, but this does not include the last half of 2021, when prices in many regions actually increased.
Agricultural land prices in California have also climbed despite concerns about continued drought. In 2021, the average price of $10,900 per acre was up 9% from 2020.
The purchase of land always exacerbates the current national trend of more agricultural production coming from larger farms.
Dan Sumner, an agricultural economist at the University of California-Davis, attributes some of the increased value in switching to higher-value crops, such as replacing alfalfa with walnut trees.
Overall, however, Sumner said farmers are feeling good about their future.
“It shows a belief in the economics of agriculture,” he said.
The volatility follows the market’s breakdown in years of trade wars due to the coronavirus pandemic and drought in much of the West.
For individual farmers, the biggest benefit of rising prices is that they can borrow money at better rates for annual needs such as seeds and fertilizers and long-term investments such as tractors and even more land.
High prices have prompted many people to buy and sell land, leading to a record $765 million in agricultural land sales last year, overseen by Farmers National Company, one of the nation’s largest landowner services companies. was in
A more typical year would see about $500 million in sales, said Randy Dichut, a Farmers National real estate broker in Omaha, Nebraska.
“It’s been very busy,” Dikhut said. “It’s definitely easier to sell.”
But Holly Rippon-Butler, who runs a dairy with her parents in New York, said farm price increases are “just crazy.”
“The hard reality is, it’s nearly impossible to buy land, unless you have a source of generational family wealth,” said Ripon-Butler, who works with the National Young Farmers Coalition, among other priorities. is an organization that advocates for policy change and public funding. So that more and more people can have access to the land.
Given the high land prices, Ripon-Butler said the farmers they face typically deal with a quarter of an acre of land and 20 acres as a relatively large operation. Many farmers also rent land, and as prices rise, so do rental rates.
Frank, a farmer from northwest Iowa, said that even though he is now technically prosperous, it is difficult for him to expand his holdings as he prepares to pass the property on to the next generation.
“I have a son who does farming with me and of course he wants to expand but buying a farm right now is a big undertaking,” he said. “Even for a small farm you’re talking millions of dollars.”
Follow Scott McFetridge on Twitter: https://twitter.com/smcfetridge