The Farmland Bubble?

Dan Piller has a must-read piece in the Des Moines Register today on the amount of speculation going on with farmland in certain parts of Iowa.  Some tracts of land have been selling above $8000 and $9000 an acre in Central Iowa, and there's a mention of the auction last month in Sioux County where land sold for nearly $14,000 an acre.

What's good about this lengthy article is that Piller mentions the history of past bubbles in the 1920s and the late 1970s, and raises concern about the possibility that farmers might be tempted to over-leverage themselves through land acquisitions or borrowing on equity to buy new equipment.  I rag on the Register often, but this is the kind of quality journalism that peeks out every now and then.  The chart showing the range of average farmland prices over the past 38 years is important to see as it shows that farmland values have doubled in the past decade.

It will be interesting to see what will happen to the ethanol subsidies and protectionist tariffs in the next few months or years.  Also under consideration is a scaling back of welfare payments to farmers for a myriad of reasons, none of which have ever really make sense.  If any of that stuff gets repealed, expect to see commodity prices fall and the usual bursting of the bubble.