Reports of $5,000 an acre are out there, but they're not common, U author says

The value of Minnesota farmland keeps climbing. But are prices creeping or leaping?

A new University of Minnesota study found that, contrary to rural chatter, farmland prices rose a modest 5.8 percent last year. That's based on data from every sale, statewide.

"Those really high-priced sales we hear about in the coffee shops are real, but they're not typical," said U economist Steve Taff, author of Tuesday's report. But he's bracing for skeptics wondering, "Why we aren't seeing that big jump that everybody knows is out there."

Across rural Minnesota, reports of leaping land values are commonplace. At Miller Realty in Breckenridge, owner Guy Miller notes prime cropland sold last year for roughly $2,500 an acre.

Today, "land around this area is hitting $3,200 to as high as $3,800," Miller said. "Now, whether it's going to stay there, I don't know."

St. Paul-based AgriBank found that from mid-2006 to mid-2007, central Minnesota farmland values rose 10 percent, and in southern Minnesota, 14 percent. When a new land-value report comes out this summer, "Our guys at the banks are expecting it will be that much or more," said spokesman Dave Ladd.

The Minneapolis Federal Reserve Bank saw a big leap, too. Its survey of ag bankers found Minnesota farmland values soared 24 percent last year.

Yet Toby Madden, regional economist for the Minneapolis Fed, doesn't dismiss Taff's U study, even if its results varied.

"His is more accurate in that he takes the actual sales records," Madden said.

The health — and wealth — of rural Minnesota is tightly linked to land values, making it a closely watched indicator of vitality, tax base, profitability, net worth and desirability. Rising land values also are lifting farm rental rates, which ripple through the food chain.

"That's a higher input cost for the agricultural producer, so you'd expect that agriculture product prices would increase because of that," Madden said.

Taff notes his 2007 sales data run only through September. Because the grain markets really caught fire over the winter, he concedes that maybe "the zoom is coming," he said. "But people said the same thing last year."

Farmers aren't the only ones who buy farmland. Retirees, hunters, investors, developers and nostalgic urbanites are players, too. But in 2007, the big change was crop prices, which most affected farmer-buyers. That led to some good gossip at the town café, but it doesn't reflect the statewide reality, Taff said.

"Basically, we've got a handful of sales of land over $5,000 an acre, and that's what everyone hears," Taff said. "People say, 'Gee, all farmland must be at that level,' and that simply is not the case."

To view the report, go to http://landeconomics.umn. edu.