Ethanol Drives Up Value of Iowa's Farmland
Farmers are planting more corn to try to meet the demand for the biofuel.
By DAVID ELBERT
REGISTER BUSINESS EDITOR
May 29, 2007
The value of good farmland in Iowa shot up 16 percent in the past year, with 7 percent, or nearly half the total increase, coming in the first quarter of this year, the Federal Reserve Bank of Chicago reports in a new quarterly survey of agriculture lenders.
The big gain is an indication of how strongly ethanol demand is driving agricultural investment, the Chicago Fed said in its May agricultural newsletter.
Corn prices, the bankers noted, were up an average of 63 percent to $3.31 a bushel during the first quarter, while farmers nationwide said they expect to plant 16 percent more acres to corn this year.
Farmers are trying to meet a growing demand for ethanol, the newsletter said. "Ethanol production will require 27 percent of the 2007-08 corn crop, an increase from 20 percent for 2006-07," it said.
Average soybean prices during the first quarter were up 18 percent, but soybean acreage is down 11 percent, the newsletter said.
"The surge in corn acres would result in the greatest acreage planted to corn since 1944," the Chicago Fed said.
The increase in Iowa farmland values was the largest of the Chicago Fed's survey of four states. Lenders in Indiana reported average farmland value increases of 10 percent for the 12 months ending April 1, while in Wisconsin the increase was 8 percent, and in Illinois it was 7 percent.
The average gain in farmland value for all four states was 10 percent.
The rapid increase in values is reflected in the fact that 5 percent, or half of the 12-month increase, came during the first three months of 2007.
Separately, a private survey of Iowa agricultural real estate agents in March found Iowa farmland prices had increased 13.6 percent in the past six months. That survey was by the Iowa Farm and Land Chapter No. 2 Realtors Land Institute.