Farmland Prices Soar
Land, only for letters, but one of the most powerful words in the world. When God created the Earth, it included a set amount of land, and no matter what kind of high-tech stuff man can come up with, nobody can make any more land.
When you look at it that way, land seems priceless. However, land has set values, at least it did.
Lately, the land used for farming has gone up to astronomical prices. Why is this?
I'm going to quoteUSA Today, 'Record-high prices for corn, soybeans, wheat and other commodities have left growers flush with cash to purchase more land. And what the farmers don't pay for out of their own pockets, historically low interest rates provide them with easy and cheap access to money to close the deal.'
I will add that with this being the case, the favorable mix of both cash and credit has provided fuel to drive up land values across the Midwest, stoking fears of a bubble ready to burst.
Sid Pederson, owner of Pederson Commodities in Sioux Falls, SD, says 3 things are driving up the price of farmland.
Number one, cheap money (referring to low interest rates making it easy to borrow money to purchase land). Number two, high commodity prices. The more land you have, the more you can produce to take advantage of these prices for grain. And number three, historically land has always been a good investment.
Pederson warns land buyers to carefully use caution when buying land today.
According to Mike Duffy, an economist at Iowa State University who watches land prices, in Iowa, where rich soil, favorable weather and ethanol and livestock production help foster demand for limited growing space, farmland values have soared 90 percent since 2009. An acre of farmland that a decade ago sold for an average of $2,275 now goes for $8,700.
Here in South Dakota, on the Eastern side of the state, good farmland is currently bringing between $5000 and $8000 an acre.