Iowa Senator Tom Harkin says this week’s report on rising Iowa farmland values is worrisome. The annual study from Iowa State University found the average selling price for an acre of Iowa farmland was nearly $8,300, an increase of nearly 24-percent from a year ago.
“I am concerned about a possible land bubble forming out there on this,” Harkin says. Authors of the study say record corn and soybean prices are part of the reason for the latest sizeable increase.
Harkin acknowledges it appears Iowa farmers will “be in good shape” in terms of future demand for feed grains and for grain and stover used in ethanol production. Still, he fears changes in the weather and other factors could quickly prompt another farm crisis like the nation saw in the 1980s.
“What I really worry about is that debt and leverage don’t get overextended,” Harkin says. “We’ve seen that before, haven’t we? Remember the 70s, when all these grain prices went up, plant fence row to fence row and all that. A bubble happened and a lot of people got wiped out because they were way overleveraged, too much debt when the 80s hit.”
The I.S.U. report found farmland prices were widely varied across the state. For example, prices in northwest Iowa were up almost 34-percent, while prices in southeast Iowa were up only nine-percent.
“A lot of times a lot of this is driven by land values near urban areas, for example, that seem to go up extraordinarily high,” Harkin says. “They can be a driver. I’d like to see how much of this land that is changing hands is actually being financed with debt.”
The 23.7-percent price increase found in the I.S.U. report marks the third straight year the state’s farmland values have increased by at least 15-percent.