LE MARS, Iowa -- At a recent auction, a 120-acre farm just south of Le Mars sold for $8,200 an acre -- more than $2,500 above the estimated average value for Plymouth County land.

More than 100 people attended the sale, with 10 bidding at least once, auctioneer Bruce Brock said.

Across the region, competition for good-quality farmland has helped stabilize values, which fell last year after more than a decade of healthy gains.

"The market has come back strong," says Brock, whose firm, Le Mars-based Brock Auction Co., has six offices in Iowa and South Dakota. "We get one or two calls a day, four or five times a week from people looking to buy land."

The stepped-up demand, say farmers, auctioneers and other industry experts, comes largely from grain and livestock producers looking to expand their operations, but also some non-farmers wanting a safe, dependable investment in uncertain financial times.

Dan Kriener, owner of Kriener Farm Management, a Sioux City-based farm management and appraisal business, said farmland has outperformed the equity markets in recent years.

"At least with farmland you can walk on it," Kriener said. "Stock market investment is a just a computer blip in space."

Todd Brown, who farms 240 acres near Paullina, Iowa, said farmland sales are scarce in his area.

"Unless somebody dies and their heirs sell it off, it usually transfers to the family," Brown said.

Kriener said he has seen more listings in the last 60 days than at any time in the last six months, but the current supply is still more limited than in recent years.

In late 2008, he said, a number of farms came on the market. After voters elected Barack Obama that fall, some land owners decided to sell because they feared the new Democratic president and Congress would sharply raise capital gain taxes, Kriener said.

"I think we just front loaded this market at that time,'' he said.

All about income

Farmland values softened in the early months of 2009 as credit markets tightened and falling grain and livestock prices and rising fertilizer and fuel costs combined to make many farming operations less profitable.

"The value of land is determined by the income," said Iowa State University economics professor Mike Duffy, who annually conducts a widely watched farmland value survey. "When we think income is going to be off, then values tend to fall.''

Duffy's latest survey of 478 real estate brokers, ag lenders and others industry officials found the average farmland value in Iowa fell 2.2 percent, from $4,468 per acre in 2008 to $4,371 last year. It was the first decrease since 1999.

Some other surveys showed a steeper loss in Iowa, Duffy noted. The Realty Land Institute, for instance, found statewide dropped 7 percent from October 2008 to the same month last year.

Duffy said farmland values started to rebound in the latter half of 2009, a trend that has continued into the first few weeks of this year.

"Basically, good farmland is still bringing some money, and probably has strengthened some," he said in an interview last week with the Journal. "The recreational kind of land is still pretty soft."

Duffy's latest survey again found Northwest Iowa with the state's richest farmland. Of the nine crop reporting districts, the 12-county are in the extreme northwest tier -- Buena Vista, Cherokee, Clay, Dickinson, Emmet, Palo Alto, Pocahontas, Lyon, Plymouth, O'Brien, Osceola and Sioux -- reported the highest average value of $5,364. That's down just .6 percent from the 2008 number, which also was the state's highest.

Three counties registered gains last year, led by the 4.6 percent growth in Lyon County, which borders both South Dakota and Minnesota.

Some other area counties experienced sharp decreases, compared to the previous year. The largest, 6.3 percent, was reported in Woodbury County, where the average per-acre value dropped an average of $268, to $4,002.

Meanwhile, the per-acre average value in two area counties -- Sioux and O'Brien -- topped $6,000 last year.

Productive land

Northwest Iowa farmland is considered more productive than some other sectors of the state, and the region also boasts a diverse ag industry with one of the nation's largest concentration of livestock and biofuels plants.

"We have a tremendous advantage over a lot of places that have single-use only facilities for their grain,'' Brock said.

Last fall's harvest produced near record yields of corn and soybeans for area producers. Heading into another, some are reinvesting that added income.

"I think it's created some wealth and that's translated in buying land to strengthen their whole operation," said Joel DeJong, an Iowa State University Extension crop specialist based in Northwest Iowa.

Better-quality land in the northwest quadrant generally is selling for $5,000 to $8,000 an acre, according to area farmers and real estate officials.

Surveys have limited value in determining sales prices, said Kevin Klaassen, broker for Klaassen Realty, which has offices in Sibley, Sheldon and Hartley.

"Each property is different and has factors that go into the final value,'' he said.

Klaassen said his firm recently sold a 33-acre tract in Osceola County for $5,700 per acre. An earlier sale of land in neighboring Lyon County, meanwhile, brought $7,675 per acre.

Farmland prices also have been stabilizing in northeast Nebraska and southeast South Dakota, according to area observers.

At one recent auction, an 86-acre tract near Jefferson, S.D. sold for $7,076 an acre, a record for Union County. "I haven't even seen any at $6,000 or more before," said Jana Fultz, who has worked in the county register of deeds office since 1991.

Bigger farms

The demand for land has been largely driven by the steady increase in the size of farms over the last few decades. Today, large-scale producers annually plant 1,000 acres or more.

Machinery advances allowed producers to upgrade move from eight- to 16- to 24-inch planters and combines.

"You can spread the fixed cost of owning the big machinery over more acres so that actually lowers your cost of production,'' Duffy said.

Klaassen said sales of larger parcels in the 160-acre to 320-acre range to a single buyer are becoming more common. Historically, auctioneers would divide larger tracts into smaller pieces in hopes of getting more bidders and a higher per-acre price.

"It's starting to get to the point where they're willing to pay a premium to buy a larger tract," he said.

In 2009, 72 percent of buyers of Iowa land were neighboring farmers, Duffy said. Those buying farmland as an investment has gradually increased to 23 percent.

Duffy said the graying of Iowa's farm workforce has contributed to the scarcity of land for sale. In 2009, more than half of Iowa farms were owned by those age 65 or older, up from just 29 percent in 1982.

For a long time, Duffy thought the trend would result in a significant amount of land changing hands. His survey data now suggests that's not necessarily the case.

Half of the veteran farmers say they plan to keep farming full- or part-time. Of those who retire, more than a quarter rent their land to other farmers.

"They're looking at that land as their income,'' Duffy said. "They're looking at it as their security and their legacy."