Harvest estimates, land prices on the rise

Thursday, September 27, 2007

The corn harvest is under way in sections of the corn belt, and the news coming from the fields is good. Despite having heat and a dry July, the U.S. Department of Agriculture recently raised its already-high expectations for the crop to 13.3 billion bushels, which would be an all-time high and 27 percent more than last year's 10.5 billion bushels.

Iowa farmers are expected to keep their number one spot harvesting 2.54 billion bushels this year, 24 percent more than in 2006, according to the USDA. In Illinois, the No. 2 corn producer, farmers are expected to harvest 2.34 billion bushels, 29 percent more corn than last year. And No. 3 corn producer Nebraska is expected to produce 1.51 billion bushels, a 28 percent increase.

This is good news for the naysayers who worried that the additional corn needed for ethanol production would drive up the cost of food. Economists say the diversion of corn from livestock and poultry feed is likely to drive up food prices for at least a few years.

In news that is directly linked to crop yields and currrent prices, the value of cropland continues to rise. According to a statewide survey released this week by the Realtors Land Institute shows that the value of farmland increased by 7.1 percent in the past six months. The rate of increase is down from the past six months.

While land values are seeing a steady increase in all nine regions of Iowa, the largest increase -- 9.8 percent -- came here in northwest Iowa. The lowest was southwest Iowa, with a 4.1 percent increase in land value.

Higher crop prices are cited most often when asked the reason for the increases, but the analysts predict that this rate of increase can not be sustained.

As we have learned in northwest Iowa, the ethanol boom is not without risks, including to those who have speculated on farmland. While much is said about the market regulating itself, we can't help but wonder if there is a farmland bubble.