People buying and selling Iowa farmland have been on a roller coaster ride the past 30 years. It has made some cheer and others sick to their stomachs.
For most of the past decade, prices have steadily climbed. Reports indicate values soared by about 24% this year.
According to the U.S. Department of Agriculture, the average value of cropland statewide this year is $5,700/acre. Land brokers and buyers say high-quality soil easily sells for thousands more.
"Goodness gracious, I can't take a breath because it keeps going up," says Dave Hommel, a rural Ivester farmer describing recent land auctions he has attended. "Farmers are holding on to their chairs with both hands, and lawyers for estates are just smiling."
A year ago, Hommel paid $9,000 per acre for a 60-acre tract.
Landowners have been on this ride before.
Farmland more than quadrupled in price from 1971 to 1981. A sharp descent followed, the primary cause of the farm crisis in the mid-1980s. It is considered the worst time in agriculture since the Great Depression. Forced farm auctions in the Corn Belt were common.
There is fear among growers and agriculture experts it could happen again.
"Maybe not as prolonged, but in two years we could have another crash. Paying $10,000 to $15,000 an acre for ground will come back to bite you. I'm fairly confident about this," says Larry Depping, a farmer near Reinbeck.
Many economists, land brokers and growers think land values will probably drop in the future. But will the so-called land price bubble burst?
Experts don't believe a repeat of the '80s is likely. The fundamentals that led to the increase in land prices and the financial stability of growers are far different today than three decades ago.
Often referred to as a golden era of agriculture, the 1970s were very profitable for U.S. farmers.
Yields increased as seed, fertilizer, herbicides and pesticides improved. Advances in technology and machinery allowed farmers to produce more with the same amount of manpower. And foreign demand exploded.
In 1972, the U.S. signed a historic deal with the Soviet Union to sell wheat and corn to the communist nation at subsidized prices. The result was higher grain prices in the United States.
Iowa corn worth an average $1.25 per bushel during the 1970 marketing year, according the USDA, soared to $2.97 four years later. During the same time period, soybeans went from $2.82 per bushel to $6.36.
Government statistics show the nation's farmers made about $14.2 billion in 1970 and $34.3 billion three years later.
"I can see why it was referred to as the golden era. ... The Soviet Union entering in the food market as a buyer gave a big boost to the whole ag complex," says David Oppedahl, business economist for the Federal Reserve Bank in Chicago.
The bank will host a daylong land price seminar Tuesday.
Exports grew by about 20 percent a year in the '70s. Farmers wanted to cash in, and they needed land and bigger and better machinery to do it.
Interest rates were low and crop prices were high. Farmers loaded up on debt, using their farms as collateral. Growers also acquired land on contract.
Land values soared by more than 375% during the decade. Iowa State University Extension figures show the average cost of Iowa farmland was $419/acre in 1970. At the end of the decade, demand drove prices past over the $2,000 mark.
"Everyone wanted to be a part of it. There was unbridled exuberance," says Mike Duffy, ISU farm economist and coordinator of Extension's annual farmland price survey.
As well as the 1970s treated Iowa's farmers, most of the '80s were equally bad.
A number of factors contributed to the farm crisis, primarily the collapse of land prices. Iowa lost farms at an unprecedented rate, and farm bankruptcies hit an all-time high.
Government statistics show Iowa had 117,000 farms at the beginning of the crisis in 1982 and 107,000 at the end six years later. The national bankruptcy rate was 23.05/10,000 farms, according the Brian Briggeman, an economist with the Federal Reserve Bank of Kansas City.