Is a bubble bursting on farmland prices?

A report out Wednesday shows farmland prices fell last year, one of just a few drops in the past two decades.

Farmers bringing in the corn and soybean crops at sunset in rural areas south of Worthington, MN. -- Farmers all over the state worked late into the evening to bringing in the fall harvest. This farmer is combining corn somewhere south of Worthington, MN.

Photo: David Brewster, Star Tribune

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Minnesota farmland values ticked down last year -- only the fourth decline in the last two decades -- fueling speculation that air may finally be coming out of a farmland bubble.

The median price of farmland sold in Minnesota last year was $3,020 an acre, down 7 percent from $3,263 in 2009, according to a University of Minnesota report released Wednesday. It edged down very slightly in 2008, too, but then crept back up before falling again last year.

The report's author called the new drop "tiny" and said he doesn't read too much into it because such a small portion -- 1 to 2 percent -- of Minnesota farmland is bought and sold in any given year.

"We're kind of reading tea leaves here," said Steven J. Taff, an agricultural economist at the University of Minnesota.

Still, the long-term picture shows prices inching up statewide for decades, and then appearing to peak in recent years, before turning down. Has a bubble popped?

"Bubbles are psychological," Taff said. "Some people might read into this, [that] that's what happened here."

The 117-page report is based on farmland sales data from the state Department of Revenue.

Taff's study also shows that the last two years have seen a historically low number of sales and acres sold. Taff said he doesn't think that's because of the recession or difficulty in getting financing, but because landowners expected a high price, didn't get it and then took the land off the market.

"The past couple of years we think there are more discouraged sellers," Taff said. "I don't hear stories of people being turned down to buy land."

Bubble spotting has become something of a national sport since home values burst and are still deflating.

Yale economist Bob Shiller, author of "Irrational Exuberance," last month wrote that "my favorite dark-horse bubble candidate for the next decade or so is farmland."

Land values in Minnesota are somewhat insulated from pure outside speculation because of the state's broad corporate farm law prohibiting institutional investors from investing in farmland, said Doug Spanier, a lawyer with the state Department of Agriculture.

Steve Kramer, who farms 1,000 acres of corn and soybeans near Hector, Minn., said farmland is a thinly traded market and prices are hard to gauge. He said he thinks local prices are already on their way back up.

"With commodity prices up since the beginning of the year, it looks to me like land prices have resumed their climb," he said.

Jennifer Bjorhus • 612-673-4683

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