DES MOINES, Iowa — Jeff Frank, a fourth-generation corn and soybean farmer, doesn’t feel rich, but simply based on the skyrocketing value of his land in northwest Iowa, he’s a appropriate way to describe it, even if he scoffs at the idea.
He lives in the same nearly century-old house, grows vegetables in the family garden and shops at the same grocery store about 24 kilometers away. “We live the same way we have our whole lives,” he said.
Yet even though Frank’s life hasn’t changed, the several hundred acres he owns about 80 miles (129 kilometers) northwest of Des Moines have suddenly earned him millions of dollars.
It may surprise city dwellers excited about their home values that countless farmers like Frank are actually experiencing a housing boom that makes home prices pale in comparison. While median existing home prices rose 15.8% in the United States last year, farmland values rose about double in places like Iowa.
“I’m definitely surprised by the magnitude,” said Wendong Zhang, an economist at Iowa State University who oversees an annual survey of farmland values.
The rise in values, particularly in the Midwest, is due to high prices paid for major staple crops of corn and soybeans, abundant harvests in recent years coupled with low interest rates and the optimism that the good times will continue.
But they are a mixed blessing. They enrich farmers who already have a lot of land, but make it much more difficult for smallholders or young farmers who start to obtain land unless they inherit it.
Most purchases are made by operations that see the value on a larger scale, seizing the chance to buy nearby land.
“If you miss this opportunity, you may not get another chance,” Zhang said, describing the current mood.
As for consumers, higher land costs generally do not affect grocery prices.
Historically, farmland values go up and down, but over the past two decades it’s mostly gone up, and in the last year it’s gone up a lot – 33% in the Frank part of the state and 29 % in all of Iowa, one of the best agricultural countries. states. Agricultural prices also climbed elsewhere in the Midwest and climbed in most other parts of the country as well.
The Federal Reserve Banks of Chicago and Kansas City recorded double-digit increases in Illinois, Wisconsin, Indiana, Missouri and Nebraska.
In Iowa, average farmland fell from $7,559 per acre in 2020 to $9,751 per acre in 2021.
Nationally, farmland has increased by an average of 7%, but that doesn’t include the last half of 2021, when prices really took off in many areas.
Farmland prices have even soared in California despite concerns about persistent drought. In 2021, the average price of $10,900 per acre was up 9% from 2020.
The land purchases reinforce an existing national trend of increased agricultural production from larger and larger farms.
Dan Sumner, an agricultural economist at the University of California-Davis, attributes some of the rising value to shifting to higher-value crops, such as replacing alfalfa with nut trees.
Overall, however, Sumner said farmers feel good about their future.
“It reflects confidence in the economics of agriculture,” he said.
The recovery follows tumultuous years of trade wars, market crashes due to the coronavirus pandemic and drought across much of the West.
For individual farmers, the biggest benefit of rising values is that they can borrow money at better rates for annual needs like seed and fertilizer and longer-term investments like tractors and more. more land.
High prices have prompted many people to buy and sell land, leading to a record $765 million in farmland sales last year, overseen by the Farmers National Company, one of the largest leading landowner service companies in the country.
Randy Dickhut, a Farmers National realtor in Omaha, Nebraska, said a more typical year would see about $500 million in sales.
“It’s been very busy,” Dickhut said. “It’s certainly easy to sell.”
But Holly Rippon-Butler, who runs a dairy with her parents in upstate New York, called rising farmland prices “just crazy.”
“The harsh reality is that it’s nearly impossible to buy land unless you have a pre-existing source of generational family wealth,” said Rippon-Butler, who works with the National Young Farmers Coalition, an organization that, among other priorities, advocates for policy changes and public funding. that would allow more people to have access to land.
Given high land prices, Rippon-Butler said the beginning farmers she meets typically work as little as a quarter acre of land and consider 20 acres a relatively large operation. Many farmers also lease land, and as values rise, so do rental rates.
Frank, the northwest Iowa farmer, said while he’s technically wealthier now, it’s difficult for him to expand his holdings as he prepares to pass ownership to the next generation. .
“I have a son who farms with me and of course he would like to expand, but buying farmland right now is a big business,” he said. “Even for a small farm, you’re talking millions of dollars.”
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