Farmland Prices and Estate Planning

Des Moines Register:

“If an estate is not planned carefully, the death of the parent-owners sets up the classic dilemma where you have one child who has stayed on the farm and worked it while the other siblings went to the cities,” McCarthy said.
A supposedly “equal” distribution of the land and assets would divide three ways, but not recognize the sweat equity of the sibling who stayed and worked the land, McCarthy said.
“And then when the other two siblings want to sell, the other member of the family might have a very difficult time raising the money to buy out the brothers and sisters, and the farm would have to pass into other hands,” McCarthy said.

Out-of-town family members are also the bane of farmers who have cash rented from elderly landlords for years.  Once the parents die, the out-of-town owners often want to cash out ASAP.  The most interesting part of the article was this tidbit:

Iowa farmland has risen in value to an average of $6,708 per acre, according to the latest survey by ISU released in December. A decade ago, Iowa farmland still sold for about $1,900 per acre.
The average price figure represents all farmland. Some of the highest quality land has brought figures in excess of $15,000 per acre, with a record sale of $20,000 per acre reported in late November in Sioux County.

$20,000 per acre?  That is mindblowingly insane.  That would be $3.2 million for a quarter-section.  That ground better be growing 300 bushel corn.  Reuters has more on that sale:

As word spreads of each heady price tag from public sales in Sioux County, auctioneers and real estate agents said the boom is quick to ripple outward. The latest spike was set off in early December, when farmer Leland Kaster paid $20,000 an acre for fields next to his dairy near Hull, Iowa, a Sioux County hamlet located about 50 miles southeast of Sioux Falls, S.D.
If Kaster were to grow corn on his new 73.4 acres, he'd be able pull in about $1,250 per acre in gross revenues next year, given futures market prices and average corn yield. More simply put: It would take the Kaster family more than half a generation to recoup their money - and that's only if corn prices remain relatively high.
"We call it the Iowa Effect," said Nebraska auctioneer Randy Ruhter. Land prices in eastern Nebraska, a state which saw a more than 40 percent jump in the third quarter, edged up another 3 to 5 percent after the deal.
"When prices go up there," Ruhter said, "prices go up elsewhere."

Wow.  If the commodity boom turns to bust, we'll see who's swimming without trunks, as Mr. Buffett says.  The article gives some background to the farmers of Sioux County, they sound a lot like the farmers of Mercer County, Ohio, except for being Dutch Protestants instead of German Catholics.