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Wednesday, August 7th, 2013
back to siouxland

13 0807 back to siouxland

I made a quick trip to Siouxland to list the house of my youth, now available for the first time in the 62 years since my parents built it.  You can imagine that my mind was wandering during the road trip, although I needed to stay sharp to steer clear of those participating in the annual Sturgis migration.  Seeing the wind turbine farms that now obstruct the prairie vistas kept bringing me back to reality.

But enough of that.  It is the land under those turbines that is the subject of this posting, an update of a popular one from January 2012.  (It also contained some beautiful words from Frederick Manfred, who created the name “Siouxland” for the region where I was raised.)

This chart updates the one in that earlier posting, showing the value of farmland in Sioux County, Iowa, updated once a year, along with the prices of corn and soybeans, indexed to the starting price of farmland so that you can get a sense of relative movement.

In my home county, some miles north in Minnesota, land sold for $16,000 an acre.  How sustainable is this trend?  Since I wrote a short piece recently about the calamity of the Dust Bowl, it’s worth noting that “sustainability” can refer to the durability of the farming practices as well as the price trends.  During that horrific period, they came unwound together.

As you can imagine, the future path of the red line above is of critical importance to the health of Siouxland, but it is also more baked into investment assumptions and strategies worldwide than is realized, as the favorable trends are projected to continue on and on.

The next time someone talks about investing in farmland, have them give you a detailed look at the underlying economics of the dirt and an examination of the scenarios that might come into play.  You might be surprised.  (Chart:  Bloomberg terminal.  Farmland data:  Iowa State University.)