The average sales price of Minnesota farmland went up again in 1997, according to the University of Minnesota's annual study.
"The buying enthusiasm I reported a year ago seems unchecked," says Steve Taff, a public policy economist with the university.
The 1997 study of 1,634 sales showed a median price of $916 per acre of farmland, compared to $901 in 1996 and $759 in 1995.
Most 1997 sales were for parcels of 160 acres or less. "Hardly anyone buys whole farms any more," Taff said. Most transactions are for pieces of farms, and purchasers are not new farmers, but neighbors rounding out existing operations.
Some of the high prices can't be supported by conventional farming income from the parcels themselves, Taff says. "But many farmers and lenders tell me these prices make sense from a whole-farm perspective. As long as farms continue to be cannibalized by neighbors to round out their land base, there will be higher prices."
But some high farmland prices have little to do with production potential, Taff said.
"As long as residential development pressures at the edge of big and small towns remain unchecked by effective land use policies, there will be upward pressure on farmland for conversion into residential use.
"And as long as people are prepared to buy farms to retire on, enjoy on weekends, hunt on, or simply to enjoy the pleasures of ownership, there will be upward pressure on prices. The production component seems to be losing its prominence - even in traditional farming areas - to the financial, locational, and speculative components."
Taff says use of farmland price data needs scrutiny.
"Is 'agricultural land' really a separate market?
Possibly we should shift toward analysis of a single 'land' market in rural
areas, one that operates independently of intended use, whether it be crops,
recreation, timber, or speculation."