Iowa Farm Brings Huge Price

November 18, 2010 07:21 AM

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Rumors of the huge price tag from a recent auction in Sioux County, Iowa, appear to be true. An 80-acre tract recently sold for $13,950/acre at an auction confirms Del Beyer, Beyer Auction & Realty, Sioux Center, whose firm handled the auction.


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While this may raise some eyebrows and lead some to believe new levels of farmland prices are about to be established, it’s best to look at the area and understand it’s history. "The area is dominated by very well-established farm families with deep roots," he tells us.
The ground featured a CSR (corn suitability rating) of 70 — typical for that particular area. Selling price —$13,950 an acre.
"There are commercial-size cattle, hog, poultry and dairy operations here, as well. Plus, there’s the pull from ethanol plants," Beyer says. The presence of so many extensive, diverse operations can result in intense bidding when a tract becomes available.
Beyer says bidding started at $7,500 an acre and rose in $100 increments with recesses at $11,000 and $12,000 an acre. Two bidders — neighboring farmers — carried the contest upward in $50 increments from the $12,000 mark. Total time of the auction: 25 minutes.
For perspective, Beyer was involved with two other recent land auctions in Sioux County — both 80-acre tracts. One sold for $8,550 an acre and the other $9,575 an acre.
Answering the question of a more representative price for farmland can be a tricky one, because there are many exceptions.
The land market is local — the Sioux County market is unusually strong, for instance, but there are others that are very conservative. So coming up with a representative price range is difficult. However, Farmers National Company (FNC) has attempted to do just that. The charts below show their estimated average value for high quality farmland (blue) and below average farmland (green) as of the end of September.
"You’ll see individual land sales that are above the averages we list here," says FNC CEO Jim Farrell, AFM, "but in general you’ll see the bulk of sales coming in somewhere near the figures we’ve listed here."
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Spell Check

11/18/2010 12:50 PM

  Well, I can tell you a few things here about this sale. 1st off, there is 5 acres of CRP on the farm. 2nd this producer obviously didn't buy fertilizer from Ag Partners in the last few years. By going to other suppliers 2 years ago Urea was $400 a ton less, Dap was $500 a ton less and potash was $500 a ton less. Looks like he saved enough for the down payment by using the other suppliers. 3rd the second bidder was doing a 1041 with the city of sioux center for some land to get in compliance with the DNR or EPA. 4. All the ground sales in the area around there and west/sw of the area have not gone under $9,000 an acre for the last two months.

11/18/2010 01:54 PM

  Can there be any doubt that we have a farm bubble! Prices don't make sense based on the underlying economics and when all these guys go bankruput, I guess they will be asking for a government bailout? Imagine a world of higher interest rates and cellulosic ethanol (corn replaced as the main feedstock). Banks where I live are getting very nervous as they should be. I think this is the time to be paying off debt and preparing a warchest to pick up the pieces when this train goes bust, which I think will be pretty soon. I don't think it will be as bad as the early 80's but its going to be pretty bad.

11/18/2010 04:37 PM

  I enjoy interesting cash flow stories. $14,000 times 5% equals $700 per acre. At $12.00 soybeans, thats 58.33 bushels per acre without production costs. At $5.00 corn, that 140 bushels per acre without production costs. I assume these bidders were cash buyers, if not, I'd like to meet the banker and find out what kind of batteries they are using in their calculators.


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