While he’s optimistic about the future of Midwestern agriculture, U.S. Sen. Tom Harkin, D-Iowa, said he is closely watching the trend of increasing land prices with an eye on a potential tailspin.
“I am concerned about a possible land bubble forming out there on this,” Harkin said on a conference call with The Daily Times Herald and other media.
According to the Associated Press, the value of Iowa farmland rose 24 percent over the last decade to a statewide average of $8,296 an acre. That’s three straight years the value has jumped more than 15 percent. The value of an average acre of Carroll County farmland increased 31 percent to $10,400.
Harkin said he expects American agriculture to be in good shape as far as demand for feed grains and for both grain and stover for ethanol production.
“It looks like we’re going to have a pretty strong market in the future,” Harkin said. “But those are always subject to weather changes and things like that so I am concerned about it.”
Harkin said his chief concern is that debt and leverage don’t become overextended.
“We’ve seen that before, haven’t we?” Harkin said. “I remember the ‘70s when all these grain prices went up.”
Many farmers were “wiped out” because they carried too much debt when the 1980s hit, Harkin said. Values dropped by two-thirds between 1981 and 1986, the AP reports.
Harkin said he suspects some of the increase in value is linked to demand by land for development near urban areas.
“They can be a driver,” Harkin said.
State Sen.-elect Mark Segebart, R-Vail, has expressed similar concerns.
Harkin said he wants to examine how much of the land changing hands involved debt.
Longer term, Harkin said, he has no doubt foreign producers will react to the markets for corn and soybeans.
“I think people are going to respond,” Harkin said. “You see what Brazil has done and Brazil hasn’t stopped yet. I mean, they’re still putting land in production. Of course, a lot of that is impacting climate change because when you’re cutting down rain forests and things like that you’re ruining the carbon sink.”
Iowa State University Extension’s Mike Duffy, who develops the land survey, told the AP he fully expects farmers in Brazil, Argentina, Russia and South Africa to boost production in response to the markets.