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Many farmland purchases made with cash

Although corn and soybean prices have come down considerably from their summer highs, it doesn’t seem to be slowing the increase in farmland prices.

A recent auction of 74 acres of farm ground in northwest Iowa brought 20-thousand dollars per acre—a new record for the state.  The land was purchased by a neighboring farmer.

The high land prices are making some people nervous.  But as Iowa State University ag economist Mike Duffy points out, many of the land purchases are still being made with cash rather than credit.

“This is one of the things I get asked a lot about—concern about a speculative bubble similar to what we had either in the housing market recently or the ag market in the late 70’s—and a big difference is we aren’t seeing the debt being taken on,” Duffy says.

“Now we are having—I think—maybe some hidden debt coming along, in the form of, like, deferred tax liabilities or things like that.   But a lot of these are still cash on the barrel head,” he adds.

With good commodity prices and a strong livestock industry, Duffy says farmland prices could continue to climb—especially in situations where emotions help to drive up the price.