The IOWA FARMLAND rush continues on...........

[Fishhead24]

For the record, Iowa farmland has increased EVERY year for the past 20 years.

VALUE:

1986- $950
1990- $1200
1999- $1800
2003- $2900
2005- $3900
CURR- $5000+

.........and remember, one is making 3-6% on this land cash renting per year.

[mal_noles]

[ QUOTE ]
For the record, Iowa farmland has increased EVERY year for the past 20 years.

[/ QUOTE ]

I dont know where you are getting your data from but according to the Iowa Land Survey prices declined in both 98 and 99. Not to mention the 20 year time frame conveniantly starts right after 4 out of 5 years double digit declines in 82-86. Where are you getting your numbers from? I am going to have to side with the survey since you seem way to clouded by your bias.

Iowa Land Survey 2006

[Brad1970]

Up until now I've managed to stay out of this thread but I can't help but throw my .02 in here. FWIW, I have worked/lived in the agricultural industry for about 30 years, so I can relate to this thread somewhat.

Fishead24 from his posts sounds like he's from Iowa & probably has ties to the ag industry. If that is the case, he needs to remember that this industry is extremely cyclical. That includes all associated commodity & land prices, demand, etc. All of these forecasts that he has quoted are just that...forcasts. That's what these people are paid to do. They are very short term & most don't pan out. I still haven't figured out why he is hawking this post so hard...I assume he's in the ag real estate business. I've never been to Iowa except maybe passing thru but if the farmers in this state are the same as where I come from, the vast majority inherited this land & aren't just gonna slap it on the market just because the value shoots up all of a sudden. Nor are these same people, most of them anyway, aren't going to get themselves highly leveraged with the banks with their land as collateral & risk default. It just not in their nature. I would imagine that the available farmland is up for sale because a farmer went bust or died & left no heirs or some other oddball reason.

One other thing to consider. In my area, some of the largest land holders aren't farmers. It's corporations like Met Life insurance, Prudential insurance, International Paper, Ducks Unlimited, etc. I don't know if that's the case in Iowa but why would joe investor want to get into a bidding war for farmland with someone with a much deeper pocket?

There is one way to make money off of farmland that no one has mentioned in this thread. Take it out of production & place it in the CRP. You get paid by the USDA to do nothing with it but still own it. Some folks even plant trees on it or enroll it as a wildlife habitat or both (and the trees are yours to sell when they mature). So, if you knew what you were doing, you could get paid multiple ways for doing nothing but signing a contract with the government.

So, in a nutshell, I believe there's been some good points made on both sides of the fence here but this whole topic of average investors buying farmland is...well...pretty ludicrous. Most have no idea about how to make money on this & most wouldn't even attempt this because of the slim profitability/cyclical nature of agriculture.

[Groty]

I'm not arguing ethanol. It is simply a tailwind to the demand story.

We’ve gone from 1.5 billion people on the planet in 1900 to 6.5 billion today. During that time, the overwhelming majority of the global population lived in extreme poverty. The widespread participation in the current global economic boom is causing the standard of living of the world's population to dramatically improve. One study I read suggested that once a person (or maybe it was a family?) reaches an annual income of $3000, the first permanent change in behavior is to eat “better” (i.e., more meat consumption). Many millions of people have reached and exceeded that $3000 number in the past few years. I interpret the increase in per capita global wealth to mean the demand curve for grains (the raw material input for meat) is permanently shifting to the right irrespective of what happens with ethanol. And the longer the boom lasts, the farther to the right the demand curve will shift.

Part of the reason why grain has “always gotten more affordable” in spite of a rapidly growing population is that farmers have continuously improved their productivity. It seems to me that, at least domestically, the ability of farmers to squeeze out ever higher yields using better farming techniques is reaching a point of diminishing returns. The most productive farmers already plant the hardiest, highest yielding, most disease and pest resistant strains of seeds. And they use herbicides, install irrigation systems and apply fertilizer in optimal amounts to maximize yields. Over the long term, there’s a huge incentive for scientists and researchers to genetically engineer “super strains” and I’m confident they will. But that takes time. In the short to intermediate term, the opportunity to increase marginal supply is limited. So, we have a demand curve shifting to the right due to increased global wealth and a supply curve that is more or less fixed. That would seem to support a higher equilibrium price level for grains, which in turn derives the demand for and value of farmland.

However, the one major and very important supply issue I have no clue about is how much arable land outside the U.S. can be quickly and easily converted to growing grains.

[Fishhead24]

Since the last ISU land survey of farmland prices came out in late February of this year when the value on above average farmland in Iowa reached $4600, these key developments have taken place to even further cement what I believe is a key bullish market in Iowa farmland.......

1. Corn prices have remained strong and steady at $3.88 a bu.

2. Soybean prices have risen over 10% to $8.26 a bu.

3. There has been no significant change in interest rates

4. Crude oil is almost up 10% a barrel to $66 creating optimism for ethanol.

5. No news on the new farm bill from congress.

The only small negative is the continued strength of the stock market, which has done very well over the last 3 months.

[Fishhead24]

The CEO of GM speaks out today on ethanol. I understand his reasoning is agenda ridden, but make no mistake about it this is a huge plus for ethanol and in turn farmland prices............



"It's time to move beyond exclusive reliance on the historical regulatory approaches that clearly haven't solved these problems, like CAFE, and move forward to embrace solutions that will yield the results that we need - lower oil consumption, lower oil imports, lower carbon gas emissions," he said.

Wagoner again pushed GM's offerings of vehicles that can run on either gasoline or a blend of 85 percent ethanol known as E85.

"It's increasingly clear that, of anything that we can do over the next decade, ethanol has by far the greatest potential to actually reduce U.S. oil consumption, reduce oil imports, and reduce carbon gas emissions," he said.

[hawk59]

Groty,

Why make a big long posts about stuff you are just making up? Grain yields in the US are currently increasing as fast as they ever have, saying that farmers are using the most efficient agriculture technologies is true but that also has been true for the last 10,000 years. The technology is always improving and farm yields are always going up as a result.

[Groty]

Hawk59:

I find it fascinating that someone actually believes grain yields are “increasing as fast as they ever have”. I think you are misinformed. One example is to take a look at wheat yields over the 10 year period from 1995 to 2004 on the first page of this USDA publication:

http://www.usda.gov/nass/pubs/agr05/05_ch1.PDF

To summarize, yields per harvested acre varied between 38.5 bushel and 44.2 bushel during that 10 year period. The worst year was one of the most recent, 2002, when yields were only 38.0 bushel per acre. How does this data support your claim that "yields are increasing as fast as they ever have"? I think its more rational to conclude that yields per harvested acre were basically flat during the period and that variances between years was likely due to environmental factors such as prevailing weather conditions.

So you are either making up your claim that "yields are increasing as fast as they ever have", or you have access to data to suggest they are. I'm eager and anxious to see the data/studies to support your claim. BTW, I did not say grain yields would not continue to increase. I did say that in the short to intermediate term, productivity increases appeared to have leveled off resulting in a rate of diminishing returns.

And dismissing the impact of higher standards of living on grain demand as "fluff" is, quite frankly, an ignorant statement that defies logic and common sense.

I was responding to Desert Cat about why I believe grain prices may be in a secular uptrend, regardless of what happens with ethanol, which would lend support to the OP's proposition about farmland values. I was explaining my rationale for holding that view and was attempting to mislead anyone or "make stuff up".

[Fishhead24]

If your going to be bringing up wheat and Iowa in the same debate, you may as well go the full distance and bring up sugar cane and orange trees. Make no mistake about it, CORN is the grain right now supporting this upward in land prices, followed closely by soybeans.

[hawk59]

groty,

come on, not only do you make stuff up but you engage in bad statistics. you can't make your case based on cherry picking certain years because of the huge impact of weather, which is essentially random from year to year.

here is the long term trend which shows how things are going: