By PJ Huffstutter
IOWA FALLS, Iowa (Reuters) - It took just 31 minutes for Donald Ellingson's family to end an agrarian tradition that had survived more than a half-century, by auctioning off 153 acres of rich Iowa farmland.
Five years after their father's death, Ellingson's three children had grown weary of the demands of running a farm. Their tenant farmer had retired, and finding a new one was tough. The youngest of them was 60 -- too old, they agreed, to return to a life of risky finances and long work days.
Combines and corn were not part of the lives of Donald's eight grandchildren or his 14 great-grandchildren. They live far from here. And given land prices these days, the family agreed it was the right time to let the past go.
"I think dad would be fine with us selling the land," said Diane Guerrttman, 60, who lives in Wyoming and works with at-risk children.
Across the Midwest, the dizzying surge in rural land prices is accelerating a fundamental reshaping of the farm sector in the world's biggest food exporter. Instead of digging in to benefit from the boom in grain prices, the next generation is opting to cash out of the small, family-owned farms that harbor centuries of rural wisdom and deep tradition.
The bidding wars that are now common at farm auctions and inside attorney offices, resulting in a 25 percent jump in land values last quarter, are bittersweet for heirs and aging farmers alike, whose children have fled to the city, leaving them unable or unwilling to shoulder the rising financial risk of a farm.
Estate sales are cropping up, too, say realtors. Farming heirs like the Ellingsons, who long ago left the land with no plans to return, would rather have the cash than take on the challenge of a business whose profits fluctuate with weather, commodity price and politics.
"I know it's the right thing, but it's still hard to see it go," said Max Ellingson, 67, after the auctioneer's voice quieted inside the American Legion hall here and the $1.2 million final bid was accepted.
On the other side are often investors who view U.S. farmland as the latest hot commodity, with prices soaring at a rate not seen since the 1970s, in some cases to record highs.
In the Hawkeye State, the nation's leading corn producer, prices have risen by nearly a third, as many bet that China's expanding wealth, the increased use of biofuels and a growing global population that has just passed 7 billion will put a premium on fertile soil for decades to come.
Large-scale farmers and wealthy outside investors - who are weary of Wall Street's roller coaster - are lining up to plow their money into the perceived stability of farmland. Large parcels of good land can be difficult to find in the U.S., and what is out there doesn't tend to come up for sale very often.
While the exodus of family farmers and influx of investors has been going on for years, the surge in prices is "speeding it up", says Todd Hattermann, an auctioneer and real estate salesman for Vander Werff and Associates in Sanborn, Iowa.
TRADITIONS, KNOWLEDGE LOST
It is an emotional shift for a place like Iowa, where families who have labored on their land for a century are honored each summer at the state fair.
This enthusiasm, some fear, will further accelerate the loss of agrarian knowledge and speed up the emptying out of rural America.
The higher prices, too, have started to squeeze out smaller farmers who remain, but are unable to compete against their wealthier peers and outsiders eager to hedge their portfolio. Some critics worry that the pursuit of profits will outweigh concerns over maintaining the long-term health of the soil.
"You have mega farmers that have no sense of the history of the land and little care for it," said David W. Baker, a farm transition specialist at Iowa State University Extension. "It's just another section they have to go to."
The trend is particularly frustrating to a small wave of young farmers, who are returning to the family farmstead to try to enjoy these boom times and escape the languishing U.S. economy.
"If you don't have at least 50 percent cash to put down on a sale, you've got no chance these days," said Wayne Keller, co-owner of BuyAFarm.com, a Midwestern land auction and real estate company. "What kid has that kind of money, when even small farms are selling for millions of dollars?"
OWN YOUR OWN
It didn't used to be that way. For generations, rural Iowans believed strongly that farmers should own their own land. That attitude to keep outsiders out solidified during the Great Depression, when banks and insurance companies foreclosed on thousands of farmers and took back their lands.
The philosophy prevailed here and elsewhere in the Midwest in the late 1970s and early 1980s, as fear of outside investors resulted in some states passing laws that banned farmland from being owned by foreigners and corporations.
For decades, they got their way. In 1982, 94 percent of the state's farmland was owned by people who lived in Iowa, according to data compiled by Iowa State University.
But that resolve has waned. When the U.S.'s rural economy eroded in the wake of the 1980s farm collapse, many families encouraged their progeny to leave the land and find their economic fortune in America's cities.
The kids left. Many of them they stayed away. As the years passed, that familial loyalty to the land faded.
Today, about 20 percent of Iowa farm land is owned by people who don't live in the state, according to Iowa State University data. The average Iowa farmland owner is a single woman - often a widow - who is over the age of 70.
MORE RISK-TAKING, LESS BACK-BREAKING
Running a farm has always been inherently risky. Though technology and automation has made the physical labor easier, the financial burden has grown even more challenging.
Input costs have doubled or more in recent years, and commodity prices have remained volatile. The recent MF Global bankruptcy has strained the trust of some farmers in the markets and Wall Street in general.
So they're selling. Farmland auction listings in the Sunday edition of the Des Moines Register have increased 65 percent since August, when corn and soybean prices surged to new highs. Billboards in Illinois and TV ads in Missouri tout sales for crop land and cattle operations.
"What we're losing are the small family farms, the 200 acre to 600 acre ones," said Michael D. Duffy, professor of economics at Iowa State University. "It's the scale issue. Big is getting bigger."
The pricing boom is raising concerns among economists that if a rural real estate bubble is forming, a collapse could be devastating to one of the nation's few economic bright spots.
Such deals could eventually sour, they warn, if commodity prices fall, exports to developing countries wane and the costs of farming continues to rise. On Friday, corn dropped to a five-week low due to concerns over the economic impact of the EU crisis and sagging export demand.
Even for those willing to take on the risk, the future of their investment is far from clear.
For four decades, Robert Schaper scrimped and saved in order to expand the family's 575-acre corn and soybean farm in Allen County, Indiana. By day, he worked on the line of an auto parts factory. At night, he walked the fields and nurtured the land.
When a local farm widow died, and her out-of-town heirs put her land up for sale, Schaper and his aging father cashed in their savings and went to the auction.
"There were all these outsiders. There was a person from North Carolina, bidding on the phone against us," said Schaper, 57.
The Schapers won, but paid more than they wanted: $420,000 for 60 acres.
"If the crop prices stay high, we'll be fine," Schaper said. After the sale, Schaper called his sons to tell them the news. They live in Florida and Arizona. Neither farms.
(Reporting by PJ Huffstutter; editing by Jonathan Leff and Marguerita Choy)