Don't get excited about the Star Tribune's story about the Minnesota farmland bubble bursting. The story, which ran yesterday, cites research conducted by the University of Minnesota which shows the median price of Minnesota farmland sold in 2010 declined by 7%. (You can read the full story here.) The annual study, conducted by ag economist Steven Taff, looks at the sales reports for each piece of farmland sold within the state as recorded at the county courthouse. The data is available to the public in the Minnesota Land Economics website. There are more than 52,000 sales listed in the website from October 1, 1989 to September 30, 2010. That September 30 cut-off date probably explains what's happening here.
When did corn and soybean prices take off last year? August. So the data cuts off just a month after the rise in prices began.
If a sale is recorded at the courthouse, when did the sale occur? Who knows, but not on September 30, 2010 -- at least 30 days ahead of that and more likely two, three or more months ahead of that. That means the recorded data did not have a chance to reflect any of the demand strength stimulated by the dramatic run up in commodity prices which occurred the last half of 2010. In fact, the commodity price outlook the first half of 2010 was gloomy becoming gloomier. In May, for instance, the USDA was projecting a season average price of $3.50 per bushel for 2010-crop corn. What little cropland that was offered sold, but the market was not very active.
Taff's research is very thorough as useful. You can check it out here. But just keep in mind that it does not reflect any of the dynamic market activity that has occurred since Oct. 1, 2010. In his executive summary, Taff writes: "There has been no evidence of either a widespread "farmland bust" or--a phenomenon sometimes reported in the press--a "farmland boom" in Minnesota, but there has been a notable reduction in the number of transactions and in the acres sold in the past few years."
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