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Wednesday, Oct. 7, 2015

The CommStock Report

Friday, November 2, 2012

David Kruse, president of CommStock Investments, Inc.
It used to be that the trend of higher farmland prices in Iowa came from Illinois. Not anymore. The epicenter of increasing farmland prices is now in northwest Iowa, specifically emanating from Sioux County. Farmland prices have gotten so high due to the strong local competition in Sioux County that buyers have been progressively going further and further outside their ag metropolis to find bargains, causing a ripple effect increasing farmland prices counties away.

Clay County, the home county for Commstock Investments, is two counties east. The farm north of Royal that set a county record here at $13,950 acre this month was bought by someone from "over there," as Sioux County is referred to here in Clay County. A farm that sold in Sioux County on Oct. 26 set the state record so far at $21,900 an acre. Sioux County buyers had been raising farmland prices in O'Brien County next door for some time and they have now ventured into Clay County to purchase farmland.

Wealth was accumulated in Sioux County through hard work and livestock production. I would think that they would buy little commercial fertilizer over there because every acre can be covered with manure to provide the soil nutrients. They produce ethanol and use every pound of distiller's grain. They can take off all their corn stalks for bedding and put back so much in manure that their soil organic matter still likely increases. They produce much above average crop yields as a result.

This generation is building wealth on the legacy of the last there. This is not something that was handed to them over night. It has been earned and accumulated over time. Our family cattle/corn operation is structured much like what you would see in Sioux County, but I believe that there are only two such operations in Clay county, while Sioux County is literally covered with them with no room to expand. There have been farms bought in Sioux County for the express purpose of adding to the operation's manure management plan to shorten the distance required to haul manure.

Sioux County has had progressive bankers attuned to livestock. There is no shortage of capital. Their public school systems are top notch making sure that the talent pool of the next generation is highly educated. While the ethnic diversity is increasing, the communal heritage is Dutch. They can trace their farm linage home to the Netherlands.

One time, former USDA Undersecretary Tom Dorr was put on the political hot seat for attributing their lack of ethnic adversity as a reason for their economic success -- but he was right. He meant nothing racial about it, only that a close knit group of people, with a strong work ethic and community entrepreneurial spirit can do great things given the opportunity in the country.

Unemployment is just over 3 percent, having never having risen above 4.8 percent in the Great Recession in Sioux County, which is about as low as it can get. The population grew nearly 7 percent in the 2010 census. There is thriving agri-business there to support the farm/livestock sector. Livestock production increases the economic activity necessary to support grain farming several fold. It attracts innovation and local industry. If you drive into Sioux County with your window down you know there are livestock around. In many counties that aroma creates some pushback and resistance to livestock site expansion, but not in Sioux County. If you don't like livestock then you would not live there.

The HSUS is not welcome. These livestock producers know more about proper animal husbandry in their little finger than animal activists now intimidating the commercial food supply chain have in the hand they slap good livestock producers with.

The success of Sioux County is a microcosm of the entire state of Iowa. This state has little budget problems compared to other states and the nation. It has no deficit and it has an AAA credit rating. It can show the best school systems in the USA and the roads are even getting fixed. One thing avoided here is the political acrimony that has so hobbled the ability to govern the nation in Washington.

There is as much of the political diversity in Iowa as in other states but they have not put party first here before the common interest. The parties have worked together for solutions to problems here as they have not done in Washington and other states.

Our state voters do not crush the life out of economic vitality as they do in California and our elected officials run prisons rather than make up the cell block as they do in Illinois.

If the entire country adopted the work ethic of Sioux County and Washington practiced government like they have in Des Moines, the USA would be on a far better track than it is on now.

David Kruse is president of CommStock Investments, Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet. CommStock Investments is a registered CTA, as well as an introducing brokerage.

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