When will the farm bubble burst
Just when real estate agents reported Humboldt County, Iowa, farmland breached $13,000 and $14,000 at local auctions early this summer, neighbors next door in Nebraska were finding ways to grow 200-bushel corn at less than half the land cost.
No wonder the Cornhusker State has seen the sharpest real estate gains nationwide, jumping 40% in 2011 alone.
Last fall, bargain-hunting Nebraska farmers purchased a dryland Saline County farm for under $4,500 per acre. The do-it-yourselfers spent the winter bulldozing trees and an abandoned railroad track to square up fields.
They drilled a well by Christmas and installed two windshield-wiper pivots that were operating on healthy looking, knee-high corn by mid-June.
In total, the new owners spent about $5,500 per acre on land that has potential to produce consistent 200-bushel corn despite periodic droughts. Realtors say it would bring $9,000 or $10,000 per acre today.
Extreme weather and agriculture's real estate and commodity boomlet are finally justifying capital improvements in what was once considered imperfect corn land.
With higher seed populations and so many more input dollars sunk into the ground at planting, farm operators like Darren Grogan and his family of Arlington, Ky., view irrigation as a better guarantee for row crops than federal crop insurance.
"Drought has put irrigation on everyone's radar this year," said Grogan, a farmer whose family recently added an irrigation dealership to their portfolio.
"If growers hadn't considered it before, they are now." Sales at the Grogan's new dealership will generate about $4 million to $5 million this season and the family expects to diversify into a well-drilling business in the next few weeks.
With his irrigated farms yielding 240-bushel corn, vs. 30 to 70 bushels on dryland corners, Grogan expects many customers will pay off installation costs the first year, thanks to $8 corn. In the past, other investors say five to seven years was more the norm.
"I've been surprised that some of my customers are people I never would have dreamed would be interested -- 200-to-300-acre part-time farmers who see buying more $6,000 land out of their realm," Grogan said.
Instead of competing head-to-head at land and cash rent auctions, they're growing production with center pivots. But the trend isn't size specific. Grogan, his brother and dad have also accelerated irrigation investments on their own 16,000-acre operation.
BETTER YIELD ASSURANCE THAN INSURANCE
"A decision to buy a pivot is an investment in certainty," Wade Sikkink, product manager for Nebraska-based Valmont said.
Farmers must agree: Valmont's Valley Irrigation sales soared 17% over 2011's record levels the first six months of 2012.
Irrigation company stocks have multiplied faster than company stock for seed, fertilizer or even farm equipment in the past decade as a result. "In Nebraska," Sikkink added, "You can raise 130-to-150-bushel dryland corn most years, or 200-to-250-bushel with irrigation, whether it rains or not."
What's been surprising senior Valley executives is that the irrigation boomlet isn't just normal replacement of aging equipment or conversion of water-guzzling flood systems to high-tech, low-pressure sprinklers. Nor is it limited to semi-arid regions like western Kansas or Nebraska with long histories of supplemental irrigation...
Source: Argentine Beef Packers S.A.