(Globe Gazette) - Mark Newman of Forest City has been an auctioneer for farmland auctions since 1981, but never has it been as exciting as it is now.

"The atmosphere is just electric," said Newman referring to public auctions. "It's fantastically exciting for buyers and sellers."

The current market for farmland is exciting because farmland values have gone up at least 13 percent in Iowa since October 2009, according to a recent survey by the Federal Reserve Bank of Chicago.

Specifically in the North Iowa area farmland values are up 11 percent, with the western part of the area seeing a 17 percent increase, according to the report.

"I think we could safely say that report from the Chicago Bank is pretty indicative of what's happening here in North Iowa," said Sterling Young, farm manager and farm real estate broker with Hertz Farm Management Inc., Mason City.

Farmland prices in North Iowa have ranged from $3,000 an acre for poorer land and up to $7,000 an acre for really good land, said Young, Newman and Fred Greder, owner of Benchmark Agribusiness, Mason City. Average farmland has been in the middle at around $5,000 an acre, the three men said.

Farmland values in Iowa declined for the first time in 2009, according to an annual survey released by Iowa State University Extension in December 2009.

However, it began to rally at the end of 2009 and has been doing so since then, Greder said.

The rally began because there wasn't very much land for sale and investors were looking to land as a more stable investment, he said.

"People that have cash are finding CDs and savings account interest rates aren't strong," Young said. "The return from land investments is better. They feel more comfortable with placing it there."

Farmland values have also gone up because of commodity prices.

"It really started to take off mid summer 2010, and it's not a coincidence it's at the same time the grain prices started to go up," Greder said. "I've always been surprised that the long-term investments like land is so responsive to grain prices."

North Iowa sellers have definitely decided to take advantage of the higher prices.

"There have been quite a few auctions and quite a few yet to come before the end of the year," Greder said.

Newman, an auctioneer and attorney at Newman Law Office PC, Forest City, agreed and said there is a big push right now not only because of the prices but because capital gain tax rates are expected to increase next year.

"For some of those sales we have significant penalties if they fail to close by the end of the year," he said. "It can mean $15,000 on a somewhat typical farm or $20,000 on a better farm if it closes after Jan. 1."

While many people are pushing to sell yet this year to avoid higher capital gain tax rates, farmland values might increase even more next year.

"I think the best is yet to come," Newman said.

His reasoning is that more people will hold onto their land because of higher capital gain tax rates, which will create a shortage in land and drive up the prices.

However, as Newman admitted, it's always hard to know what the markets will do.

"Then again I don't have that crystal ball," he said.

Greder and Young agreed that it's hard to know what the future holds.

"I wish I knew," Greder said. "I spoke to a bunch of ladies the other night and I told them I don't know if it will go up or down, but regardless they should hold onto their land."

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