Of Pediatricians and Land Bubbles

My Generation

When the farm land experts show a glimmer of less-than-usual exuberance, it gives pause.

Published on: July 13, 2011
Our pediatrician is a lovely, laid-back man named Dr. Krock. He's low-key and amiable, and after asking him to doctor three children over the course of eight years, I'd dare say he's unflappable. Broken foot? Let's take a look. Chicken pox? Come up the back stairs and we'll take a look. Weird rash? Let's take a look. My friend, Jody, also doctors with Dr. Krock, and we have decided that he is so laid back and unflappable that if he ever looks us square in the eyes and says, "This is a problem and you need to be concerned," we might flip out. Like really come undone.

And it's exactly Dr. Krock and his picture of calm that's come back to my mind over the past six months as I've followed the farm land market. I talk with a handful of farm land managers periodically, to get a feel for what's going on in the ag real estate market. And let me tell you, if anyone is exuberant over farmland, it's a farm manager. For the 13 years I've been talking with them, it has always been the best time to get into farm land. Prices high? "They're going higher, and there's no better return than farm land!"

Then this spring, during a routine phone call, I got my first sense of less-than-usual optimism. Certainly, they weren't saying there was a problem. But there was a barely detectible chink in the optimism. As a farm writer and a farm wife, this felt like the equivalent of Dr. Krock saying, "This is a problem and you need to be concerned."

I am certainly no economist nor expert at anything really, but I try to pay attention to smart people who are. So when Mike Boehlje stood up to speak at Wednesday's Wyffels Corn Strategies conference, I tuned in. He talked for 90 minutes about the forces affecting agriculture. How we've remained virtually untouched by the recession – indeed, less than a third of the farmer audience even knew someone who's unemployed.

He also says exports pulled us out of the recession, namely China's ability to recover faster than us and start buying our goods – which is all interesting considering our government's lack of attention to free trade and export markets. But that's another story (and another and another).

He talked about Congress and their failure to get anything done about the debt ceiling. He went so far as to say that if Congress doesn't come up with a real solution, the country will plunge into another recession. If that happens, and if economic growth in China and India would slow (down to 5% from their current 9.6%), the agricultural industry will be affected and will feel real pain.

What does that mean for land prices? I don't know. But I know $10,000 an acre is plain silly. Talk about unsustainable.

Boehlje was less kind, referring to a recent Iowa sale of 80 acres at $13,950, where the winning bidder and contender were both farmers: "It's stupid to pay that much for farm land."

Are farm land prices a bubble? Will it burst? I don't want to think about it, but it almost feels like it has to, at some point.