Farmland Bubble? Corn Belt Expert Weighs Factors

January 7, 2013 11:00 PM
Farmland Bubble? Corn Belt Expert Weighs Factors

Shared by Steve Taff, University of Minnesota Extension economist



"There are two ‘drivers’ for high land prices," Taff says, "high corn prices and low interest rates."



"No one knows -- that’s the short answer as to whether these record farmland prices will soon drop," Taff says.

"One main issue associated with high prices is that fewer farmers possess the capital necessary to be willing to bid on land," Taff says. This has caused existing member participation in many rural communities to be lower, and makes it difficult for new farm membership to be established. "It’s very hard for young people to get started. Many banks won’t finance new, young adult farmers."

Taff noted that in the past three years these factors have contributed to there being only about one-half as much farmland sold compared to the preceding years . As a result of high prices, only one percent of Minnesota’s farmland is sold in a given year, leading to 50% of the farmland being leased. "While some land is listed, it may be pulled off the market when sellers don’t get the price they’re looking for."



For more information visit or  

Back to news


Spell Check

1/8/2013 11:46 AM

  We have been buying farmland since the early 80's average about 100 acres a year. When interest rates were peaking our rule of thumb was and still is to buy land at 10 times average annual net return per acre if financed and 20 times if purchased with cash. For example if your farm has a net return of $500 per acre annually it will pay for itself over 20 years purchased at $5,000 per acre financed at 5%. We purchased some land 2 years ago and have recently sold most of it. Why? In the next 20 years will interest rates rise? Will the cost of growing grain increase? Will the profit margins stay the same? Farmers tend to have short memories. If we looked back 5 years and used the same interest rates and grain prices we would see a whole different picture in the land market today. Here we see several investors jumping into the market. But it won't take long for them to bail once they see a better return than they will get from farmland. They are hoping land appreciates but in the end someone has to buy or rent the stuff for them to capture the profit.


Corn College TV Education Series




Market Data provided by