Wednesday, August 8, 2007

Ethanol Is Feeding Hot Market for Farmland

While much of the nation worries about a slumping real estate market, people in Midwestern farm country are experiencing exactly the opposite. Take, for instance, the farm here — nearly 80 acres of corn and soybeans off a gravel road in a universe of corn and soybeans — that sold for $10,000 an acre at auction this spring, a price that astonished even the auctioneer.

“If they had seen that day, they would have never believed it,” Penny Layman said of her sister and brother-in-law, who paid $32,000 for the entire spread in 1962 and whose deaths led to the sale.

...A federal-government analysis of farm real estate values released Friday showed record average-per-acre values across the country. The analysis said property prices averaged $2,160 an acre at the start of 2007, up 14 percent from a year earlier.

“For everyone who owns an acre of land, we love this,” said Dale E. Aupperle, a professional farm manager and real estate consultant in Decatur, Ill., who said the rising land values were being driven by rising commodity prices (though corn has dropped some since June) and the prospect of increased demand for ethanol.

Unknown is what will come of land prices if corn loses its place in the ethanol world and is surpassed by another source like cellulosic ethanol from switchgrass.

...“Right now, a lot are still betting that corn-based ethanol will be around a while,” said Mr. Duffy, who is also the director of the Beginning Farmer Center, which assists farmers who are starting out. He noted two other farming booms, in the 1910s and the 1970s, which were each later followed by periods of depression.

“In five years, corn-based ethanol will be around,” Mr. Duffy said. “Fifteen years? I’m not as convinced.”

From the New York Times