In US Midwest, young farmers priced out of land

Ethanol demand has pushed Midwest farmland prices through the roof.

from the March 22, 2007 edition

Page 3 of 3

Page 1 | Page 2 | 3

"If you tell yourself about how high cash rents make it too difficult, then it is," says Mr. Maas, who grew up on a small farm in northwest Iowa. "But if you move past it, then you can try to overcome it."

He encourages young, aspiring farmers to come up with creative solutions, and to talk to as many farmers nearing retirement as they can – many of whom can get significant tax advantages if they enter into a partnership with a young person.

"The older generation has the capital," Maas says, "but we've got advantages, too" – including familiarity with technology and the willingness to work long hours.

One concern for anyone trying to buy land is whether the current values will last. Back in the 1970s, land and corn prices saw a similar spike, only to be followed by a crash of land values and higher interest rates that led to a wave of foreclosures and farm consolidations in the 1980s.

"It's an interesting time to be in agriculture, and from our perspective, it's been a very good thing," says Jim Farrell, president and CEO of Farmers National Bank in Omaha, Neb., which manages about 1.2 million acres that it leases to farmers and sells close to 600 farms a year.

The last four months in particular have shown a steep surge, Mr. Farrell says. The factors driving those prices up – corn at more than $4 a bushel and a steady demand for ethanol – have helped inject a sense of euphoria into agriculture that reminds Farrell of the late 1970s.

So far, he and many other farmers remain cautiously optimistic, saying that the economic fundamentals are solid. "It's much more sustainable, based on who is buying it," says Johnson.

But people like Miller who are just trying to enter the market aren't so sure.

"If you pay $5,000 an acre and corn prices drop, then you're in a really bad situation," he says. "Maybe I'm too cautious, but I think there's a lot of uncertainty."

1 | 2 | Page 3