Farmland prices increased 25 percent during the past year in several Midwestern and Western states, according to the Federal Reserve Bank of Kansas City. This increase is the largest annual rise for at least three decades. The increase is a result of “elevated levels” of farm profits and record low borrowing costs. Prices for “good” Iowa farmland rose 31 percent during the year ending October 1, including an 11 percent rise from July 1.
The increases in farmland prices were the largest since 1977 and may be succeeded by further growth. Economists note that a decline in corn and soybean prices this fall have not diminished demand for farmland. Unlike the boom and bust of the 1980s, farmers and other buyers are now paying cash and not relying on credit. Analysts also note that demand for U.S. grains by China and other countries remains strong as the world’s population has topped 7 billion this year. Experts also note that demand for biofuels, which utilize 40 percent of the U.S. corn supply, remain strong. Nebraska posted the strongest gains with irrigated and non-irrigated land values rising approximately 40 percent above year-ago levels. Oklahoma, in the midst of a historic drought, saw values increase by 10 percent.
