An optimistic climate in the Iowa’s farmland market may mean more challenges for new farmers.

The 2006 Iowa Land Value Survey, conducted annually by ISU Extension, found that the value of Iowa farmland set a new record for the fourth consecutive year. According to the survey, per acre value averaged $3,204 – $290 more than in 2005.

The survey was conducted by Michael Duffy, professor of economics and agriculture and coordinator of the Beginning Farmers Center. Duffy said the growth reflects both successful crops and growth in the bioeconomy.

“It’s looking at the ethanol plants that are coming online and saying, ‘Hey, we are going to need more corn,'” Duffy said.

The increased demand for corn has driven up prices and profits for farmers, some of which will be reclaimed as land value and rent adjustment to take advantage of the stronger market.

Marvin Huntrods, a real-estate specialist with Hertz Farm Management, Inc., a firm that works with farmers in several Midwestern states, said land appreciation may be adding to a tendency toward more larger farming operations, but in general buyers remain confident.

“Anybody that is investing [in land] right now feels it is a worthwhile investment,” Huntrods said.

Farmers that rent or manage land for cropshare are also feeling the effects of increased values. Huntrod said farmers and landowners are becoming more creative in their land-use agreements. Some farmers are willing to let landlords in on a larger portion of their profits in exchange for greater security in the case of a lower production year.

“There aren’t a lot of 50/50 cropshares out there anymore,” Huntrods said.

The added cost of securing land is especially problematic for younger farmers who are still building their operation. Duffy said he made this difficulty a point of emphasis in his survey.

“This is definitely not good for beginning farmers,” Duffy said. “Everyone hears that and thinks that higher prices are always good, but if you rent land, your cost of production just went up.”

Brody Benton, a loan officer who works with farmers at State Bank & Trust Co. cq in Nevada, said one way new farmers minimize their overhead is by partnering with more established farmers working toward retirement.

“A lot of the newer guys will get together with an old farmer that they have worked with for years who has the operation in place and come to an agreement to acquire that over a period of time,” Benton said.

Stability of land value is especially critical for operators purchasing land outright. Land values spiked in the 1970s in response to increased demand, but fell off again in the 1980s.

Duffy said values should remain at least stable as long as growth in the bioeconomy and especially ethanol production continue to stimulate commodity prices.

“I think there is some real potential for it to have that plateau and drop back, but I definitely don’t see anything in the next few year that would lead to that kind of drop back,” Duffy said.

Huntrods said so far selling prices are still more or less in line with growth that has already been seen in the corn market.

“I think there is a little bit of speculation,” he said. “The increase in value of a bushel of corn is in a positive correlation with the price of land.”

Benton said most of his customers feel similarly positive about the corn market and consider land a solid investment.

“There is a lot more confidence out there with three dollar corn than there is with one dollar corn,” Benton said.