Iowa News

Could farmland bubble burst?

PRAIRIE DU CHIEN, Wis. - Some agriculture experts warn the market for farmland could be headed toward a similar fate as the housing market bubble.

This past summer's drought made a lot of crops across the Midwest unsalvageable, but it also drove prices and profits way up.

Those record crop prices have meant the price of farmland has skyrocketed too.

It's a trend Chris Olson, the owner of Olson Feed Service, sees every day -- including the 500 acres of farmland in his own family.


"With the price of crops going up, the price of farmland has gone up, rental property for renting cropland has gone up. So it's just a spiral situation going up," said Olson.

But Crawford County UW-Extension Agriculture Agent Vance Haugen has seen this trend before -- decades ago -- and it wasn't pretty.

"I mean, I'm very concerned. I'm old enough to remember the crash of the late '70s. And that was horrendous for land prices. We had land prices cut by half to three-quarters," said Haugen.

Because of this past summer's drought, crop prices have spiked. That's because there's the same amount of demand for the crop, but much less of the crop actually for sale.

That means farmers have made a bigger profit, which means they've had a lot more money to spend on farmland.

"There's a little bit of irrationality going on. People are getting a little too caught up, that this is going to go on forever. If you've ever heard the statement, [it's] 'Nothing cures high prices like high prices,'" said Haugen.

On that new land, farmers are planting the largest amount of crops this country has ever seen.

"We're going to have way more corn than we're ever going to be able to know what to do with," said Haugen.

So there could end up being way more supply than demand this year, driving prices down. That means farmers would have less money and, as a result, the value of farmland could tumble.

"What goes up can go down," said Haugen.

Olson said farmers recognize these things go in cycles; it's just that in this line of work, you have to be an optimist.

"Farmers always feel that if they just keep working hard, everything will work out and their price of land will go up, and their profitability will go up," said Olson.

Haugen said, while Mother Nature gets the final word, the best bet is to play it safe and be conservative when purchasing farmland.

The U.S. Department of Agriculture projects this season's average corn price to be $4.80 a bushel, down a third from last year's $7.20.

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