— Pickup trucks lined a stretch of gravel road where 150 farmers mingled between 7-foot-tall cornstalks and shimmering soybeans to see which of their wealthy brethren would bid on a swath of Iowa’s richest cropland. This was a farm — table-flat and 314 acres — so coveted that it drew three times the usual land-sale crowd.
“They ain’t making any more of this, boys,” auctioneer Rich Vander Werff barked into a microphone, his voice slicing through the rising July heat. “This is about as good as it gets.”
Thirty minutes later the bidding stopped at $14,300 an acre, more than four times the average for U.S. cropland. That meant about $4.5 million for the Schoenemans, a pioneering Iowa family that owned the property for generations.
Farmland auctions in Iowa now resemble a dressed-down spectator sport with Sotheby’s prices, a reflection of the yawning divide that has opened in some of the most bountiful stretches of rural America. Farm earnings in the state and throughout the United States increased at eight times the rate of nonfarm wages from 2008 to 2011, fueling resentment and straining the social fabric of places with deep egalitarian roots.
“Iowa had had historically low levels of inequality, but now it is skyrocketing,” said David Peters, a sociologist at Iowa State University in Ames who specializes in income disparity. “Today you have far fewer farmers and a small number earning larger and larger incomes. It doesn’t spread through the economy like it used to.”
Booming worldwide demand for grain has showered wealth on farmers by tripling Iowa land values in the past decade and setting them up for record profits this year, even in the face of the nation’s worst drought in more than half a century, the U.S. Department of Agriculture projects.
Land that had long produced boxcars full of corn and soybeans is now yielding a new crop: locally grown millionaires. In doing so, it has brought to the nation’s rural areas the kind of income divide that had long been the province of urban America.
Less-populated areas dominate the ranks of U.S. counties where income inequality widened the most in recent years, according to Census Bureau data. Barton County, Kan., led the nation in the most common measurement of that gap, the so-called Gini coefficient, between 2007 and 2010. The trend was driven by commodity-price spikes and the proliferation of oil drilling in the center of the state. Next is Randolph County, Ala., home to a faded outpost of the textile industry.
These rural counties reflect divergent recoveries in the first two years since the last recession ended in 2009. During that time, the top 1 percent of Americans captured 93 percent of real income growth, compared with 65 percent during the recovery from the 2001 recession, according to an analysis by Emmanuel Saez, an economist at the University of California at Berkeley.
Iowa’s most recent unemployment rate was 5.5 percent, well short of the national average of 7.8 percent. But the job growth has largely bypassed its least-populous areas.
The split has produced climbing levels of need in the nation’s breadbasket. Food-stamp demand in Iowa rose 6 percent in July from a year earlier, according to the latest government data. That’s twice the 2.9 percent nationwide increase.
Iowa’s income gap has widened, as it has in other states, after the loss of good-paying industrial jobs. A Maytag appliance plant owned by Whirlpool Corp. closed in Newton in 2007. Electrolux shut two factories last year in Webster City and Jefferson, an hour apart. The lost factory jobs have been replaced by low-skilled service positions, often part-time and without benefits.
Some, like Kari Langel’s job directing a federally funded program that taught disadvantaged youth, are disappearing altogether. On the mid-July morning of the farm auction, the 37-year-old mother of five was seeking rental assistance at a local church in Plymouth County. She’s seen other properties sell for even more than what the Schoenemans’ drew.
“I’m looking for help, and Johnny Farmer down the road is making $18,000 an acre when I was making more than they did three years ago,” said Langel, who says she lost her job in June and found herself applying for food stamps, unemployment compensation and Medicaid for the first time in her life. “It’s frustrating on so many levels.”
Surge in value, disparity
Those buying up the land are more likely to be locals than just a few years ago. The percentage of Iowa farmland purchased by investors peaked in 2005 at 39 percent before falling to 22 percent in 2011, according to Michael Duffy, an agricultural economist at Iowa State University. Farmer purchases rose in that period to 77 percent from 59 percent. The Schoeneman property was no different: A grower eight miles down the road bought it.
“It’s almost like ‘The Beverly Hillbillies,'” said David Kohl, an economist at Virginia Tech in Blacksburg, Va., describing the unprecedented good fortune of grain farmers. “They just shot in the ground and up came bubbling crude oil and they became millionaires.”
Nowhere is the surging value of property more evident than in O’Brien County, Iowa, a perfect square of 24 miles in each direction, tucked near the corner of the South Dakota and Minnesota borders. An acre of O’Brien land in 2011 was valued at $9,513, a 33 percent increase from 2010 and the state’s highest average, according to Iowa State.
Income disparity also has escalated. The top 10 percent of wage-earning households collected 54 percent of the county’s income in 2010, compared with 40 percent a decade earlier. Of more than 3,000 U.S. counties, O’Brien had the 23rd-highest jump in income inequality from 2000 to 2010, based on census data.
The concentration is in part the culmination of longer-term changes in the farm economy. Advances in technology — mechanical planters outfitted with GPS can be 54 corn-rows wide — have accelerated the consolidation in agriculture. “Same acres, bigger farms, fewer farmers,” Duffy said.
In the 1980s, thousands of farms across the country were forced into foreclosure after a speculative land-buying bubble burst. Willie Nelson staged his Farm Aid concerts as farmers watched their family history sold off at auction. Prices in Iowa sank 63 percent from 1981 to 1986. The upheaval rippled through the state’s economy, weeding out those overwhelmed by debt. The survivors are bigger and wealthier.
More Top Picks Best Laptop Cooling Stands For Students
Herb Struyk sat on a swivel chair in his air-conditioned barn office, a 12-by-12 room that resembles a man cave. Surrounded by a collection of beer posters, a deer head and a Hooters calendar, he hosts a daily coffee gab for area farmers. They gather at 9 a.m., pull their mugs from hooks on the wall and pour from Herb’s pot.
“Crazy prices, crazy times,” said Struyk (pronounced “strike”). Corn and soybean futures on the Chicago Board of Trade hit records last summer, with the government projecting the U.S. harvest to be the lowest in at least five years. He wonders aloud where corn and soybean prices are headed.
“This isn’t going to last forever,” he said, “and I’m not so sure these kinds of prices are healthy.”
Struyk began farming in 1956, at age 20, just outside of Sheldon. Today he grows soybeans and corn on about 400 acres he owns and about 300 he rents. Based on recent auction prices, his land is worth more than $5 million.
Historically high land values have given farming in Iowa the appearance of a private basement poker game, where the pot keeps getting bigger while the players — the landowners — don’t change. Struyk has a seat at the table, along with his increasingly elderly peers. Fifty-five percent of Iowa’s farmland was owned by people 65 and older in 2007, almost double the percentage of 25 years earlier, according to survey data from Iowa State.
“For the young farmer getting started, man, he has to have some help,” said Struyk, who knows some who can’t overcome the land-price hurdle. Without financial assistance, “it’s almost impossible,” he said.
High land prices prompted the Schoenemans to put their 314 acres up for auction in July. It divided the heirs.
“I didn’t want to sell,” said Rheta Schoeneman, 68, who moved back to Iowa from San Diego several years ago to continue the family’s farming tradition. In the face of soaring prices, she couldn’t persuade her siblings to keep the land, which she said Schoenemans had owned since 1829.
Change of plans
Even in families where the children want to farm, not everyone can make a living at it. Struyk’s son, Lane, got out 20 years ago because there wasn’t enough income to keep working with his father after the 1980s farm crisis. He traded dusty rows of corn and soybeans for aisles of shiny red, silver and black trucks at a Ford and Chrysler dealership in Sheldon.
The younger Struyk, 54, sells pickups to farmers, who increasingly shell out for top-of-the-line amenities including leather interior, temperature-controlled seats and GPS navigation.
Leaving the farm was “disappointing,” Lane said, pausing. “But no hard feelings. Life is difficult.”
The reality of today’s uneven recovery in rural America weighs on Kari Langel, the laid-off school administrator. She always believed that a good education would shield her from joblessness. Her bachelor’s and master’s degrees in education enabled her to move from classroom teaching to administrative positions over 15 years.
“That was my defense,” Langel said over a cup of coffee in the kitchen of her rental home in Le Mars, a few weeks after losing her job. “Everybody always said, ‘Get more education because there are jobs out there, there are jobs out there.’ But those jobs aren’t in Iowa.”
While Iowa’s unemployment rate is lower than the national average, it understates the disparities in the state’s rural economy as young people shrink the labor pool when they move in search of better opportunities, Peters said.
The census showed that two-thirds of Iowa’s 99 counties, including O’Brien, lost population in the last decade, with many people moving to metropolitan areas or out of state.