Land value increase is double-edged sword

Friday, December 28, 2007

Agriculture has been in the news recently several times. The United States Congress has passed new energy and farm bills. Both will have large impacts on our area for years to come.

The new farm bill limits subsidy payments to farmers, in an effort to cap payments to larger producers and corporations. It also provides more dollars for renewable energy and conservation programs to protect environmentally sensitive farmland over the next five years.

The energy bill rapidly ramps up the required production of ethanol, eventually to 36 billion gallons a year by 2022, a sevenfold increase. At least 21 billion gallons must be from feedstock other than corn such as prairie grasses and wood chips.

This is all good news for farmers, who have benefited from increased commodity prices as the demand for ethanol has increased. The government was wise to add the provisions for cellulosic ethanol production. Grain based ethanol will always have a place as part of the energy solution for our nation, but it has become apparent from the unintended consequences of dramatically increased production of corn that it can not be the sole source of renewable fuels.

Even before passage of these new bills, auctioneers and real estate agents have seen an increase in the price of farmland. The latest survey conducted by Iowa State University Extension indicates that farmland remains a solid investment, with the average value of an acre of farmland in Iowa increased by just over $700 during the past year, to an all-time high of $3,908.

This is all good news, unless you are trying to get established in farming or pass your farm on to the next generation. The average age of farmers continues to increase and the average size of farms continues to increase as established farmers are among the few that can afford the land or secure the financing to make the purchase.

We see no way to reverse this trend, and fear that it will, in the long run, cause severe harm to rural America.