Growing up on a farm outside of Mount Ayr, Shane Bishop learned about hard work and having to depend on himself at a young age.

But Bishop, senior in health and human performance, said he knows he can’t earn a living going back to Mount Ayr to farm after graduation.

“Someday in the future I would maybe like to, but there just isn’t enough money or land to make it work right now,” he said.

Bishop’s story is not unique. Young farmers for generations have often been faced with the enormous challenge of trying to make the most money they can off of the few acres they can afford straight out of school, said Kelvin Liebold, ISU Extension farm specialist.

But the challenge is getting even harder.

Mike Duffy, professor of economics, said Iowa farmland prices are the highest they have ever been.

“In 1981, the price of land per acre was $2,147. This year we have surpassed that at $2,275 per acre, and prices will most likely continue to rise,” Duffy said.

Duffy said there are a couple of reasons that Iowa farmland is increasing so much in value.

The first and most important is low interest rates, Liebold said.

In past years, the low rates of return for certificate of deposits and historically low borrowing rates have led to the perfect combination for investors and larger farmers to buy as much land as possible, making it harder for beginning farmers.

A second reason is Section 1031 exchanges. Liebold said 1031 exchanges are named after IRS tax codes that deal with exchanges of property that have been owned for a long period of time.

The code allows for land that has been purchased in the past to be sold at current land value tax-free to the buyer of the land.

Liebold said that, combined with 1031 exchanges, the fact that people are healthier and living longer is adding to a lack of available farmland.

Instead of farmers retiring, more and more are holding on to their land, he said, especially because of the tax code that allows their descendants to get a tax break from the 1031 exchanges once they inherit the land.

Besides these older farmers, investors and urban dwellers wanting to “escape back into peace and quiet” are also making competition for beginning farmers even harder.

“Thirty-seven percent of land sold today in Iowa is to investors. This percentage was unheard of until the past decade,” Duffy said.

Government subsidies are also playing a role in increased land prices.

A May 19 presentation given by Murray Wise, chairman and CEO of the land realty firm Westchester Group Inc., at the ISU Extension Land Valuation conference emphasized the sharp rise in Iowa farm subsidies, according to the ISU Extension Web site.

In 1981, the subsidies totaled approximately $50 million, the presentation said. In 2001, they totaled more than $1.9 billion.

Although farm subsidies can be a positive thing for some farmers, more money given to already-wealthy and prominent farmers only allows them to buy more land, Liebold said.

In addition, in 2000 the government spent $8 million to buy “open space” to promote land and park conservation, Wise said in his presentation.

All of these factors have led to questions for many beginning farmers.

Like Bishop, Erik Christian, senior in agronomy, hopes to go back to his family’s farm in Story City, but he is planning to work off the farm for at least his first year after graduation in December to make money.

Eventually, he said, he hopes to purchase land, but knows a more likely option will be cash renting.

“The key for the future of young farmers is for them to realize that they will be working on a mostly cash rent basis.

It will be important for them to make partnerships with investors to secure multiyear leases,” Liebold said.

Christian knows what he faces, but is still excited to start farming.

“My grandparents told my dad not to come back and farm, and now my parents are telling me the same thing,” he said.

“Having a 9-to-5 job with benefits is a lot more stable way to live, but somebody’s gotta farm, and it might as well be me.”