I just had to share this story at the American by Blake Hurst, a Midwest farmer and President of the Missouri Farm Bureau, as he offered up some thoughts on one of the many asset bubbles that are now helping to restore the U.S. economy to its former glory.

Farmers have cash, and nowhere to invest it but farmland. Farmers largely ignore equities, as they tend to balance the inherent risk in farming by investing in what they perceive as less risky places. We aren’t dumb, however, and have figured out that it’s a losing game to invest in bonds or CDs at rates less than inflation while we’re in tax brackets we never even knew existed.

So, farmland prices are booming. Land prices in the heart of the Corn Belt have increased at a double-digit rate in six of the last seven years.
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We farmers should be more sophisticated than the average subprime borrower and more risk averse than startup investors in the 1990s. After all, we manage multi-million dollar businesses, and since the average age of farmers is near 60, most of us are survivors of the agricultural asset crash of the early 1980s. In 1981, the average price of farmland in Iowa was $2,147 per acre; by 1986, the average farm brought $787 an acre. That period was the formative experience of my farming career, and one I would not wish to repeat. According to a recent article in the USA Today, a third of Iowa’s farmers left the industry in that crash.

In a population thus inoculated, we ought not to catch the fever again. It is a mark of the few investment choices left to farmers that we’ve so eagerly contributed to this unsustainable increase in land prices. We know better, we know it’s likely to end badly, but we don’t feel that we have an alternative.

Of course, low interest rates courtesy of the Fed get much of the blame here as, aside from some outside money coming in to add to the fun, this is really just another example of “reaching for yield” as noted above. It’s no wonder that Federal Reserve Presidents in such areas as Kansas City have voted against the East Coast consensus when it comes to the central bank’s super-easy monetary policy.