Gramma reports that a farm in Iowa recently sold for $20,000 an acre. $20,000 an acre!?! That's insane! If memory serves, 25 years ago farmland was running around $3,000 an acre. I thought this new price was so far out of line that I did some checking. It certainly looks a bubble to me. This story from The New York Times quotes a price of $11,000 an acre from the same area of Iowa less than a year ago.
A price rising from from $3,000 to $20,000 over twenty five years translates into an 8% annual increase, which doesn't sound too awful, but the change from $11,000 to $20,000 in ten months is more like a 100% annual increase. The value of farmland has been shooting up something fierce over the last 20 years, never mind the weird rise and collapse over the previous 20 years:
The price of corn is basically what drives the price of farmland, and the price of corn is somewhat volatile. The big hullabulloo over ethanol over the last few years hasn't helped.
P.S. That 8% annual increase is the same amount being used to calculate retirement benefits for PERS (the Oregon Public Employees Retirement System), a system that is looking ever more fragile.
P.P.S. Why is the big crop in Iowa corn, and the big crop in the Willamette Valley (Oregon) grass seed?
3 hours ago