Duffy says that as long as interest in ethanol is high, farmland prices should be high. According to the 2007 Iowa Land Value Survey, the average cost of an acre of farmland in Iowa jumped $700 to a record high of $3,908.
Duffy says the 22 percent increase is the greatest one-year increase since 1976. The report says that since 2000 when the average was $1,857, Iowa farmland values have increased an average of $2,051 per acre.
In Washington County, the average cost of an acre of land hit $4,289 this year, a $665 increase over the 2006 average of $3,624. Duffy says the jump is due to the renewed interest in ethanol and predicts the trend will continue for at least the next five years.
"If they continue to mandate ethanol, corn-based ethanol is the only game in town right now," he said. "As long as corn prices are held up, the ripple effect will continue to hold soy and wheat prices high."
The high price of farmland was apparent at a recent auction in Washington, during which two tracts of land each brought $7,975 per acre, a price that shocked even the auctioneers.
During the auction, 720 acres of land brought close to $5 million. During another auction in DeKalb, Ill., the price of farmland reached $10,000 per acre.
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The trend
Duffy said that farmland prices began increasing in 2000 and hit record levels in 2002, as investors bought farmland due to a weak stock market. Today, Duffy says, farmlands are reverting more to the farmers who are drawn by high grain prices.
"In last year's survey, we saw farmers were more interested in the land than investors," he said.
In Washington County, the average cost per acre in 2006 jumped 14.7 percent to $3,624 from $3,144 in 2005, according to estimates based on a survey of land brokers. This year saw a 22 percent increase to an all-time high of $3,908 per acre, according to the Iowa Land Value Survey. Uptrends in interest rates, the cost of machinery and production and already high land prices were some of the trends that slowed land values, Duffy said.
Jerry Anderson, regional manager for the Iowa Farm Bureau that covers Washington County, said that a jump in commodities prices last summer is one factor fueling the price growth. He said a growing demand for soybeans for exportation as well as an increased demand for corn in the United States is one of the factors for the jump in prices.
"They have jumped from the upper $3,000 and lower $4,000 price range to close to $6,000 per acre," Anderson said. "These are farms out in the farming community being purchased by other farmers."
He said that he is seeing more farmland being purchased by people who had not previously been in the market for land. He believes some of it is "old money that is coming out."
After the farmland crash in the 1980s, Anderson said, the price of farmland has been steadily climbing. He said that in the last few months, he has seen jumps of $1,000 per acre.
