“When it crashes it will crash a couple thousand dollars an acre — right at once. I’m looking at it could happen in the next two years.”  -Rep. Dan Muhlbauer
“When it crashes it will crash a couple thousand dollars an acre — right at once. I’m looking at it could happen in the next two years.”  -Rep. Dan Muhlbauer
Carroll County’s voice in the Iowa House of Representatives, cattleman and grain farmer Dan Muhlbauer, is sounding a warning about the dramatic jump in Iowa land values.

Beware the bubble, says Muhlbauer, a Manilla Democrat.

“When it crashes it will crash a couple thousand dollars an acre — right at once,” Muhlbauer said. “I’m looking at it could happen in the next two years.”

Carroll County farmland values hit an all-time high in 2011 of $7,921 per acre, a 33 percent increase over last year, according to Iowa State University Extension and Outreach’s Iowa Land Value Survey.

Following a statewide trend — a 32.5 percent increase over the same period — Carroll-area counties posted record land values for 2011 with Calhoun County and Sac County showing the most expensive ground in the region at $8,617 and $8,427 acre averages, respectively.

“I think this is a bubble that we’re looking at,” Muhlbauer said. “It can burst and fall back. I don’t think it will fall back like it did in the ’80s. But I can sure see it fall back to the $4,500 to $5,000 range — which is quite a reduction.”

The average acre dollar value for other counties in The Daily Times Herald coverage area are as follows for 2011: Crawford, $7,285; Shelby, $7,453; Audubon, $7,240; Guthrie, $6,616; and Greene, $7,531.

Muhlbauer has a lot of skin in the game personally with Muhlbauer Cattle — an 1,800-acre operation in the Manilla area. Most of the land is located in Crawford County where it is used for row crops. Muhlbauer also has land holdings in Shelby County (80 applies to land-price increases as it did in the housing sector five years ago.

“I don’t see it as a bubble like we’ve had bubbles in the past,” Kettering said.

The dynamics today are far different than in the lead-up to the farm crisis of a generation ago, Kettering said.

“It was speculative fever in the ’70s and ’80s when everybody went out and leveraged everything they had to acquire more ground,” Kettering said. “That’s not the case. This time it’s driven by agriculture and the commodity prices.”

Muhlbauer also said there is not as much leveraging today as in the 1980s. Property purchases are made by people with strong equity positions, he said.

“Yes, it will fall back I see,” Muhlbauer said. “But it won’t hurt the owners of the land as bad.”

One concern Muhlbauer has is the scheduled disappearance of certain incentives for renewable fuels that have buoyed corn and soybean prices.

“If we don’t keep renewable fuels going, we’re setting ourselves up,” Muhlbauer said. “Right now, a lot of average farmers are paying high rents for this property, paying high input costs for our fertilizers, chemicals, seed.”

As a legislator, Muhlbauer said, he is troubled by a proposal from Republican Gov. Terry Branstad to reduce commercial-property taxes by 40 percent over the next eight years.

If passed during boom years for farmland, the decrease in taxes could come back to hurt the state, counties and cities, Muhlbauer said, noting that valuation of property in Iowa is tied to success on the farm.

“The ag land will come down slower, but your residential and commercial can come down hard,” he said.

Muhlbauer said some heirs of longtime local farmland see this as a prime time to sell.

“You’re selling at what I think could be a peak,” Muhlbauer said. “It’s not a bad move.”

That said, most of the land is remaining local, the legislators said.

“In our area it’s been local purchases by very strong hands,” Kettering said. “There is in many cases no borrowing and in some cases very responsible borrowing. They will continue to farm it. They will continue to keep it in their families, and they have the ability to do so.”