A lone bright spot in real estate: farmland
Iowa land prices have jumped 18 percent in a year. But higher values come with a cost.
While urban and suburban homes are falling in value, farmland is soaring. It's arguably America's strongest real estate market.Skip to next paragraph
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But rising land values cut both ways for farming communities. While they increase local wealth of landowners and bring in new money, they also shut most young people out of farming and cause even established producers to pay more to rent land. They also speed the concentration of farmland into fewer and fewer hands, some economists and rural advocates say.
Rising values put land "out of reach to all but those who have large farms and/or corporate backing," says Brian Dabson, a professor at the Truman School of Public Affairs at the University of Missouri-Columbia and executive vice president of the Rural Policy Research Institute. "And that's not healthy for a rural economy."
Land prices certainly hurt the young and the aspiring farmers.
Jarrett Smith, of Spencer, Iowa, raises a small crop of corn and soybeans while working as a salesman for a seed company. Like many young people in his position, he would like to devote himself wholly to farming. But he sees little chance of that soon. "Right now, I could only dream of getting some ground."
The same sentiment echoes across rural America, especially here in the Midwest.
"There are a whole lot of young people wanting to farm – both children of farm families and young people from cities and suburban towns who want to farm," says Teresa Opheim, executive director of Practical Farmers of Iowa, a farm group whose members range from corn-and-soybean farmers to small vegetable growers. "The price of land is making it very, very difficult for them to get started, even to come up with a business plan that's viable."
Rented land even harder to get
Renting land, a traditional way into full-time farming, is even harder than buying. Young farmers say the competition is so fierce that rental land is quickly gobbled up by established farmers who can afford to farm on narrower margins and pay higher rents.
The rising cost of farmland is a problem not just for young farmers. Many corn-and-soybean farmers rent two or three times as much cropland as they own. As land values rise, so do their rental costs.
Farmers are paying dramatically more for almost everything, not just land but also fuel, fertilizer, and seed. Those who grow major commodities like corn, soybeans, and wheat need to spend more and more to put in a crop, squeezing margins and boosting risk if crop prices nosedive or if a flood or other natural disaster hits.