Farm Belt Bounces Back

By SCOTT KILMAN

Major agricultural commodities continued their extended run-up in price, underscoring how much of America's farm belt is booming even as the overall economy continues to struggle.

Contracts for the delivery of corn and soybeans into mid-2011 jumped Monday by 5% and 2%, respectively, after rising their daily permissible limits on Friday, when the U.S. Department of Agriculture sliced production estimates by small percentages. Cash cotton prices rose 3.3% Monday after a 3.9% gain Friday. They are 86% higher than a year ago.

For many crops, prices are climbing even as big harvests pile up, a rare combination. Farmland values are up while those for some other kinds of real estate languish. Debt on the farm is manageable. Incomes are rising.

Modest debt is another factor helping the farm economy. A debt crisis on the farm in the mid-1980s was so punishing that it dealt both operators and lenders a generation-long dose of caution. Farm debt, which had hit 28.5% of equity in 1985, now is just 13% of equity.

So while soured debt weighs on values in other forms of real estate, Midwestern farmland prices are climbing. Iowa land was up 8% on July 1 from a year earlier, according to the Federal Reserve Bank of Chicago.

Write to Scott Kilman at scott.kilman@wsj.com

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