Iowa farmland prices leap, but not job market
The value of land in the U.S. has declined since the real estate bubble burst in 2007. But in Iowa, farmland has been on the upswing. And just last month, realtor Peter Pollema sold the most expensive plot of land in Iowa state history.
The land -- a farm property -- sold for a record $20,000 an acre. Just shy of 75 acres, the property sold for a total of about $1.5 million.
Pollema, who is also an auctioneer, is having a banner year.
"Business is booming," he told "Early Show" contributor Taryn Winter Brill during a recent interview. "Right after we get done with this, I have another sale I have to write up about 60 miles away."
As hunger for Iowa's corn, soybeans and alfalfa remains near record highs, farmers are breaking the bank to get their hands on as much land as possible.
The price of Iowa farmland rose to a record high last year with an increase of 32 percent, compared to 2010, another record year.
Tom Root, a Drake University economist, attributes two key factors in the increase. "The first is the high commodity prices and that's fueled by global demand for commodities," Root said. "So we have a big increase in corn prices and soybean prices fueled a lot by growth in the developing world. Also, low interest rates."
With farmland selling at an all-time high, you might think Iowa is experiencing an economic boom. But with unemployment numbers still nearly double what they were before the economic downturn, businesses on Main Street continue to feel the pinch.
Jennifer Schaffer, co-owner of Paris Market, in West Des Moines, said business has been down since the economic downturn began. She said, "We noticed a shift in business in 2008 and then we've been struggling to make ends meet since then."
While Schaffer struggles to keep her store open, business has been better down the street at Nancy Earl's candy shop, Nan's Nummies. But rising prices have forced her to make some tough decisions.
"I did raise chocolate, but only because my chocolate costs went up," Schaffer said. "So I had to raise prices on candy. I'll probably be raising bakery prices the first of the year, because the bakery ingredients have gone up, and I haven't raised my prices (because of) bakery ingredients for probably six years."
According to Iowa pollster J. Ann Selzer, the economic cycle that's left so many Iowans out of work remains the main issue in caucus-goers minds.
"People are most concerned about the economy and it plays out in concerns of government spending and getting the deficit under control, creating jobs, dealing with the tax code," Selzer said. "It's financial issues that are dominating caucus-goers' agenda this year."
Root also points out that high-priced farmland in Iowa hasn't had a fruitful history.
"We had 30 percent increase in farm prices in Iowa in terms of the land also in the late 1970s," Root said. "One of the big worries we have now is we saw a big decline in the '80s and had a huge crisis in the '80s. Part of the reason was the bubble in farmland prices that occurred in the late '70s."
But bubble or not, for Pollema, it's strike while the iron is hot. Or, as they say in Iowa, "You make hay when the sun shines," Pollema said. "That's what they always say."
But is the farmland value helping to generate jobs for the state?
One economist said it's a tradeoff. These large amounts of farmland mean one less plot for the development of housing communities, manufacturing facilities and retail stores. So in essence, the farmland boom is doing very little for job creation in Iowa.
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