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Senior Contributor

Crop land bubble ready to burst?/Faust- what do you say on this recent article

Faust- another article in our favorite Iowa Paper on the Big-Bubble about to burst on Iowa farmland values. The guys on here probably get tired of me posting farmland articles out of the main Iowa paper's AG Page. Oh well, they can't shoot me!!!! But since Farmland is by far the most costly of all our costs to grow corn these days, we should keep up on what other people say about it other than just us Farmland Owners. For a guy that has to cash-rent alot of his land at the $500 to $550/acre range, that's $2.50 per corn bushel. A pretty hefty Fixed Cost Input for the guys. In fact, these $525/acre cash-rent guys need a $4.88 a bushel price on corn to just break-even for the 2013 crop year. So say they get a $5.50 price for new crop corn, this only leaves them with a $130.20/acre net profit. They can get by on this $130/acre profit, but it will be a huge drop in net acre profits from in 2012. I hope these $525/acre cash-rent guys saved money from there large 2012 per acre profits to help if needed. Also I see land south of highway I-80 in Iowa is up to $8,480!!!!! I still remember when south of I-80 Iowa farmland could be bought for only $350 to $425/acre back in 1986. I actually looked at some of this southern Iowa farmland to buy in 1988, but boy, that scared me by the big drop you get in Dirt quality, plus all the hills. No, being the Chicken type of farmland owner I am, I didn't buy any. I will leave that type of farming to the "BILLY GOAT" type of farmers you southern Iowa boys are!!!!! LOL

Yea, us north of I-80 guys can only farm the 90 CSR, Flat as a pool table type of farmland, you could say us northern Iowa guys our just a bunch of "Big Babies"!!!!!!!!

Article is below:

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Crop land in Iowa tops $11,500 an acre; bubble ready to burst?

High quality crop land in Iowa is worth $11,515 an acre, up 9.4 percent from September 2012, according to land realtors throughout the state.

The Realtors Land Institute, whose members specialize in farm and land sales, management and appraisal, said the most expensive land was in the northwest part of the state at $13,387 per acre, an increase of 9.2 percent from six months earlier. In the south central part of the state, land averaged $8,480, the lowest in Iowa, but still up 11.1 percent.

All participants in the survey were asked to estimate average values of farmland as of March 2013.

High prices for corn, soybeans, wheat and other commodities have left growers flush with cash to purchase more land. And what the farmers don't pay for out of their own pockets, historically low interest rates provide them with easy and cheap access to money to close the deal.

The favorable mix of both cash and credit has provided fuel to drive up land values across the Midwest, stoking fears of a bubble ready to burst. In the early 1980s, land prices plunged when interest rates on their loans soared and crop prices declined, leaving many farmers without the income they needed to pay the bank.

 

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Re: Crop land bubble ready to burst?/Faust- what do you say on this recent article

rsw- LMAO!  The RLA is made up by those who "farm the farmers", few if any of the jokers responding ever took on the risk to pay for a farm.  I mean . . . they have been saying land is going to crash, since the last crash in 80's.  But hey!  With land in the rural backwater selling from $4K to $8K an acre who can complain.  

 

You know when a person buys land for $400 an acre after the crash in the 80;s and it is now selling for $8K, you know 2% return is not a bad ROI.  Keep up the good posts, I am sure those who bought land when you did, enjoy reading them as much as you do posting them.  What is kinda funny is that the cash rents are close to exceeding the price paid for land after the crash in Southern Iowa.  LMAO!  John

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Re: Crop land bubble ready to burst?/Faust- what do you say on this recent article/$197 per Point

Yes Faust, I do find it funny that the cash rents are now about the same as what you could buy an acre of land in southern Iowa for in 1986. I would say in Northern Iowa, land got down to $1,000/acre for the really good dirt in 1986, you know the 80+ CSR, well tiled stuff. That land is now renting for $500 to $550/acre, so not the ROI of 1986 bought southern Iowa land. Anyway, there was a another private sale, never listed farm sale up here. Good 81 CSR dirt and it sold for $197 per CSR Point. Seems we have peaked at this $200 per CSR Point level up here now. Still a darn good price, but I just don't see anyone pushing land prices though this $200 per CSR Point resistance level anytime more in 2013, or even 2014 for that matter.

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