Ethanol Pumps Up Land Prices: Boom in Prices is Prompting Concern

By George C. Ford, The Gazette, Cedar Rapids, Iowa

Dec. 19–Demand for corn and soybeans for a rapidly expanding biofuels industry is responsible for sharply higher farmland prices in Iowa, according to an Iowa State University economist. The average value of an acre of farmland in Iowa increased by a little more than $700 during the past year, to an all-time high of $3,908, according to an annual survey released Tuesday by Iowa State University Extension.

In Linn County, the average value of farmland climbed in 2007 by 16.5 percent to $4,638 an acre. In Johnson County, the average value climbed 17.1 percent to $4,579 an acre.

The highest price for good farmland was recorded in Scott County at $5,699, up 12.3 percent from 2006.

Mike Duffy, an ISU Extension farm economist who conducts the survey, said the land boom is being propelled by the developing biofuel economy.

“The world of agriculture as we know it here in Iowa has changed,” Duffy said.Duffy said the 22 percent increase in the average farmland price this year is the greatest oneyear increase since 1976, and marks a record for the fifth year in a row. Since 2000, Iowa land values have increased an average of $2,051 per acre,more than a 100 percent increase over the 2000 average value of $1,857.

Farmland values rose statewide, with the survey recording averages above $5,000 an acre in four counties, and between $4,000 and $5,000 an acre in 50 counties. Twenty counties reported increases of more than 25 percent.

Duffy said some of the smaller percentage increases were recorded in the counties andcrop reporting districts along Iowa’s eastern and western borders. He said this reflects the impact of local demand for corn from ethanol plants.

Counties along the Missouri and Mississippi rivers previously received the best prices for crops because of low transportation costs to Gulf of Mexico ports. Duffy said those crops are being used by local ethanol plants, which is driving up farmland prices in interior counties.

The land boom is prompting concerns that a “bubble” has developed similar to what led to the farm crisis of the 1980s.

Duffy believes the land market will remain strong for at least the next five years.

“I don’t think this demand will diminish in the near future,” he said.

¦Contact the writer at (319) 398-8366 or george.ford@gazettecommunications.com

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Copyright (c) 2007, The Gazette, Cedar Rapids, Iowa

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