Iowa’s farmland price boom

By Jessica Hopper
Rock Center

It’s the home stretch of campaigning for Republican presidential candidates ahead of the caucuses in Iowa. On Tuesday night, they’ll fold up their tried-and-true stump speeches about the state of the economy – high unemployment and faltering property values; even though in Iowa, unemployment is (well) below the national average and farms are selling for millions of dollars.

In Iowa, farmland is king with prices per acre soaring more than 30 percent in the last year, sending everyone from local farmers to out-of-towners clamoring to buy land.  Demand for farmland has created a real estate boom not only in Iowa but across the Midwest. 

Farmland values are 25 percent higher than a year ago across Midwestern states like Illinois and Indiana, according to the Federal Reserve of Chicago.

“They’re not coming out here to tell us how to fix our economy,” said Dan Piller of the presidential contenders vying for caucus votes in Iowa.

Piller is a reporter for The Des Moines Register and covers agriculture and bio-fuels.  He’s watched rising corn prices in the state translate into booming land prices.

“The price of corn has about tripled in the last five years.  The price of corn essentially sets the price of farming.  Agriculture is throwing off about twice as much cash as it did just four years ago,” Piller told Rock Center correspondent Harry Smith.

That means farmland is more valuable than ever. Realtor Jason Smith has lived in Iowa his entire life and has never seen land prices as high as they are right now.

“You got a 32 percent increase in the price of land over the last 12 months.  That’s historic,” said Smith.

Smith owns a company called Dreamdirt. Standing in the midst of a 9-acre field, Smith estimated the field was worth $45,000.

“I sell farmland, real estate, stuff that people dream about.  I’ve always said, I think everybody’s got a little bit of farmer in them,” Smith said.

People are visiting Iowa from around the country, hoping to buy into the farm life.

“There isn’t a kind of person that I haven’t heard from somewhere, whether it’s the farmers from North Dakota, whether it’s a police officer from New York, bankers in Chicago and attorneys from the south.  People, and especially business owners that have cash to park, are bringing it up here to Iowa, bringing it up to the Midwest,” Smith said.

New Yorker Patrick Goetz is among those hoping to buy land.

“This is God’s country out here. This is just something I would just enjoy to retire out here, live the rest of my life.  I would love to get into farming,” said Goetz, a police officer.

Goetz said that he previously invested in the stock market, but feels land is a more stable investment. 

“You get some income off of this.  You have income generated every day by renting the tillable ground out. It’s a great investment,” Goetz said.

Long-time farmers are buying their neighbors’ farms, land that they thought would never be for sale.

“We buy land as fast as we can afford it,” Jay Mennenga said.

Brothers Marlyn and Jay Mennenga recently purchased 76 acres, bringing the total acres they farm to 5000 acres. A good portion of the new land was paid for in cash.

“You got to push a pencil before you spend the money.  You got to know how you’re going to pay for it and it’s basically, farming’s a business like any other business,” Jay Mennenga said.  “You got to have a game plan.”

Auctioneers are selling an acre of land for as much as $20,000, said auctioneer Jeffrey Obrecht.  Obrecht has been an auctioneer for over 20 years and says the prices today make a “once in a lifetime deal.”

“Last year, I did about, little over 5,000 acres for about $24 million,” Obrecht said.

Life on the farm wasn’t always so good. Tim Meyer, a fourth-generation farmer, has grown up seeing the highs and lows of land prices.

Meyer’s father once lost two farms during the 1980s when interest rates soared and land prices dropped.

“When I went to school, when I was 5 years old, there were 44 full-time farmers, that’s all they did,” said the 35-year-old Meyer.  “When I graduated, there were four full-time farmers left.”

While Meyer also works as a realtor, helping others sell their farms, he’s not willing to sell his own land.

“I think the mentality is that the farmer has become wealthy overnight,” Meyer said.  “Are those farmers really going to sell that ground? You know, I don’t think any farmer, especially any of my ancestors, really did it because of the pure fact to make money.  It’s a way of life. It’s a way to raise a family.  It’s somewhat of a legacy.  It’s much more important to me to pass on my family farm to the next generation than it would ever be to sell it.”

Meyers said that farm heirs that have no interest in farming are often the ones selling the lucrative dirt.

“Most of the farms that we’re seeing sold are estates and basically, what I’ve seen more than anything is the farms that are being sold, the heirs don’t have any farming interest.  So, they’re taking them to auction or selling them privately or whatever means they chose there,” Meyer said.

The worry for some is that the high land prices are part of a bubble that will soon burst.

“I don’t have a crystal ball,” Meyer said. 

“We’re in times that we’ve never been in before, number one.  So are we in a bubble…I don’t know,” he said.

Piller of The Des Moines Register said that the farmers who are buying up their neighbor’s land usually have to put 40 to 50 percent down on a farm loan.

“So these are not sub-prime loans that they’re making out here.  This is not like the same thing.  Farmers have the cash to do it,” Piller said.

Piller said that small community banks that traditionally lend to farmers are reporting soft loan demand.

“So the bankers say that if you have, if it’s a bubble, it probably won’t be on the lending side,” Piller said.  “It may very well be, would be, on the manufacturing side because Iowa is one of the few states to show an increase in manufacturing jobs.”

Still, Piller says people are buying with urgency.

“Farmland doesn’t come on the market that often.  It’s not like urban real estate where you see signs in the neighborhoods all the time.  A good piece of farmland may only come, become available once every 50 years,” Piller said.

Editor’s Note: Harry Smith’s full report, ‘Field$ of Dream$,’ airs Monday, January 2 at 10 pm/9c on Rock Center with Brian Williams.

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