June 29, 2012

Farmland prices sow riches, worry

Midwest cropland prices are at levels not seen in a century, but there are fears a bust is ahead.

Star Tribune

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Matt Danner stands in a corn field on his farm near Templeton, Iowa, earlier this month. Danner, part of a five-generation farm family, says he still recalls watching grown men cry at sales of failed farms. At 33, he says this is the best time to farm he’s seen in 15 years. “It takes 10 good years to fix the five bad ones of the ’80s,” he said. “It’s going to go the other way. It always does. There’s plenty of history to prove it’s not going to last long.”

The Associated Press

"In the past, farmers have tended to produce themselves out of prosperity," said Jason Henderson, an economist at the Federal Reserve Bank of Kansas City.

Then there are the rising costs for farm essentials such as fertilizer and seed. Indeed, despite Minnesota crop farmers' banner year in 2011, profits were still down almost 10 percent from 2010 due to higher costs.

Bankers are busy charting the shrinking profit margins. A sudden spike in oil prices, for instance, could alter the farm equation.The risks aren't lost on farmers. Schmiesing, who just bought the 80 acres in Blue Earth County to grow more corn, said he's perfectly aware of them. He just doesn't think corn prices will fall "for a while."

He and his brother, who run a hog operation, had to mortgage some of the 1,500 acres they farm with their father to pay for the new land. He said he probably wouldn't have bought if it hadn't been right next door.

"It's just like going to Morton, you know," said Schmiesing, referring to the Jackpot Junction Casino in Morton, Minn. "That's what farming is, it's a gamble every day.

"It's good right now. I don't know how long it will last."

 

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