Monday, January 21, 2013

They Are Worried About a Farmland Bubble in Iowa

The Des Moines Register reports:
The possibility of a farmland bubble dominated the sixth annual Iowa Land Investment Expo on Friday, where speakers explored whether the blistering pace of price increases gives way to a disruptive decline or a soft landing.

“I don’t think there’s any doubt that there’s an agricultural land bubble,” said Mark Dotzour, chief economist of the Real Estate Center at Texas A&M University.

Iowa prices surged 24 percent to $8,296 an acre in 2012, after jumping 32.5 percent in 2011 and 16 percent in 2010, according to the annual Iowa Land Value Survey published by Iowa State University.

An 80-acre tract of land in Sioux County, home to some of the nation’s most productive land, sold for $21,900 an acre in October.
It's a bubble, but it won't be pricked until Bernanke slows Fed money printing significantly or stops printing altogether. At present there is no indication that Bernanke is going to do either, it's all out money printing right now.

(ht   Doug Olsen)


Jimmy Morrison emails:
I attended the Land Investment Expo with Jim Rogers in Des Moines, Iowa last week.  I saw you mentioned the event.  During the Q&A portion, Jim said he believed the coming growth in the agriculture industry means this is not a bubble.  He's not buying land in Iowa, because he's not buying anything in the US out of fear of future exchange controls.  However, he did say if you're going to own land in the US, it should be in places like Iowa.


  1. That link didn't work for me. I think this will:

    Farmland investors talk of possible Iowa bubble

  2. I wonder how much of the money invested is from Chinese interests? Through surrogates, probably. It makes sense for them to repatriate U.S. dollars while they're still worth something. They've been buying "farmland" in the Bahamas as well as other properties for a while now. (The Bahamian Dollar is tied to the U.S. dollar). Anyhow it's simple enough to exchange the dollars before spending them.

  3. Many times on this blog you have made the point that the world is due to higher commodity prices due to "money printing". If commodities will see a substantial sustained projected increase in prices why wouldn't free, competitive markets trade agricultural land at higher prices? Particularly, when financing costs are at record low? It's only a bubble if the projected increases in commodity prices don't materialize. You can't have it both ways.

  4. It seems correct to me to put into the equation better farm commodity prices equals good profits (roughly it is this the Jim Rogers thesis) the reality of historic not so good profits for farmers in time of rapid prices increases for so many farming products: shortage historically was the name of the day in so many parts of the world that in different historical periods experienced bad agricolture price increases; many farmers preferred to give up the interesting margins and not produce ...because final good prices was real for people who had to buy those products and in every way they tried to underconsume for that reason..but was not real for the people that had to produce the expensive consumer products; the difference - the good margin - was often confiscated in so many ways directly and inderectly.
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