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Red Hot Land

February 6, 2011
By: Jeanne Bernick, Top Producer Editor

The farmer anxiety was palpable inside the City Limits Convention Center in Colby, Kan., where 15,500 acres was up for auction. The farmland—suitable for corn, wheat, milo, soybeans and sunflowers — was offered as a multiparcel auction of 50 individual tracts that could be combined to produce the highest aggregate bid.

Once the bidding started, it quickly ratcheted up to combinations of units totaling more than $15 million. The land eventually sold to an investment group from Connecticut for more than $20 million, or $1,356 per acre, making it one of the largest amounts of crop acres ever auctioned at one time.

Local grain producer Lon Frahm got a bid in the combinations before quickly being shut out.

"I’m used to being the big guy, and now I’m being pushed around by the bigger guys," says Frahm, who farms 20,000 acres. He says the land market is simply crazy right now. "We’ve had dryland sell for $2,200 at auction that would have gone for only $800 an acre five years ago. It’s unbelievable," he says.

Linda Niebur with real estate broker Mason & Morse Ranch Co. in nearby Burlington, Colo., says

demand is excellent for quality farmland. Her company sells land to a lot of outside investors and

people taking their money out of the stock market because they’re looking for safer investments.

Extreme Prices Hit Corn Belt. In the Corn Belt, strong crop returns, low interest rates and a growing expectation that both might continue is setting the farmland market on fire, says Mike

Boehlje, Purdue University ag economist. He’s recently seen prices for Indiana farmland exceed $10,000 an acre in some extreme cases.

Between 2000 and 2010, the average price per acre of mediocre Indiana farmland—land capable of

producing an average corn yield of 155 bu.—rose from about $2,300 to slightly more than $4,400 this past June, Boehlje says. "Many of the land sales in the Midwest are to farmers, rather than outside investors, so it’s farmers bidding against farmers," he says.

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