Synopsis: Bloomberg–Farmland is at an all time high and farmers are wealthier than ever. This market should not be overlooked but sought out.

Iowa Farms Minting Millionaires as Rich-Poor Gap Widens

By Tim Jones and Elizabeth Campbell

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 U.S. 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.”

Grain Millionaires

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 U.S. Census Bureau data. Barton County, Kansas, 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, Alabama, home to a faded outpost of the textile industry.

Divergent Recoveries

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 5.2 percent, well short of the national average of 7.8 percent. While that has complicated Republican Mitt Romney’s efforts to take the state’s electoral votes away from President Barack Obama, 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. (WHR) closed in Newton in 2007. Electrolux AB (ELUXB) 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.

‘Johnny Farmer’

Some, like Kari Langel’s 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.”

Like the ‘Hillbillies’

Those buying up the land are more likely to be locals than just a few years ago. The percent 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 Polytechnic Institute and State University in Blacksburg, 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.

Disparity Grows

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.

Also in this Series: As U.S. Autos Compete Again, New Workers Earn Less

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.

Man Cave

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 intended to retire from farming in his 60s; now he’s 76 and has no intention of stopping. “It’s really hard to quit when prices are what they are, especially for people like me.”

On this July afternoon he was dressed in blue jeans and a T-shirt, with tennis shoes and brown argyle socks. Like a survivor pinching himself to make sure his good fortune is real, Struyk 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.”

Poker Game

Struyk began farming in 1956, at age 20, just outside of Sheldon. Today he grows soybeans and corn on about 400 acres (162 hectares) 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 the state’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.

Family Split

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.

Also in this Series: As Income Gap Widened, Top 1% Got 93% of Earnings Growth

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.”

Uneven Recovery

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.

Nonfarm Stagnation

Some companies that have added nonfarm jobs have done so in urban centers experiencing population increases. One, Accumold, a privately held maker of medical-device parts, plans to hire near Des Moines.

By contrast, nonfarm jobs in O’Brien fell to 6,200 in August from 6,400 at the start of the recovery three years ago, state data shows. The county wasn’t an outlier: Sixty-two rural counties lost nonfarm jobs during that period, four times the number of those that gained.

“In some rural areas, you can stay and be underemployed,” Peters said, “but in many there isn’t any opportunity at all.”

Langel was determined to remain in her home state. Then she found a job in August as a school administrator at an Indian reservation 60 miles away, in Macy, Nebraska. While she considers herself “one of the lucky ones,” she’s not so sure she’ll stay in Iowa.

The experience of filing for government assistance — even online, without having to stand in line — was humiliating, she said. It underscored her belief that the new economy unfairly selects winners and condemns losers.

‘Scraping and Scrambling’

“There are people scraping and scrambling while land is selling for $14,000 an acre,” she said. “Why?”

She grew up on a farm and understands the realities of agricultural consolidation. Still, she wonders about the price of income inequality.

“This skyrocketing of land prices is doing nothing for the economy,” she said. “It’s not helping anybody, except the farmers who own the land.”

Subtle signs of economic stress are on display in her hometown of Le Mars. It’s the self-proclaimed “Ice Cream Capital of the World,” where downtown streetlights fly bannerswith images of single-dip cones. This is the home of Blue Bunny ice cream.

About a mile from Langel’s house is Rejoice! Community Church. The number of people who come for a free monthly community meal, where they receive grocery bags of food to take home, is up 30 percent from a year ago, said Donna Britcher, who helps run the pantry.

Dream On

“The American Dream is alive in Le Mars,” Britcher said later as she sat in the kitchen of her trailer. “But it’s a dream.”

Matt Dykstra, a fourth-generation Iowa farmer, has his own aspirations. At 31, he’d like to pass the family business to his three children. That wish seems like a $14,000-an-acre fantasy as he sits in a rusty metal folding chair in his barn, flies circling overhead.

The Dykstras rent 900 acres to grow corn and soybeans. Matt’s father, Mark, bought 80 acres in 1985 at the bottom of the farm crisis for $1,800 an acre. That was less than 20 percent of the average value in O’Brien last year.

Graphic: Rural Counties Lead Increase in Inequality, Undercutting Egalitarian Roots

“Right now the only option we have is to rent, unless we win the lottery,” Mark said.

While the historic run-up in grain prices means higher profits for anyone who grows the crops, landowners enjoy an advantage because they reap higher net worth as acres become more valuable. Buying land is even more out of reach for farmers like Dykstra, who must pay more to rent the land he farms.

Rising Rent

Average rents are up 43 percent statewide since 2008, according to a survey from Iowa State. The Dykstras’ increase has been even greater. They pay about $425 an acre today, compared with as little as $125 five years ago — not to mention diesel fuel, fertilizer and other farm expenses that the USDA says will increase 6 percent this year.

The family is part of a farming class that now dominates Iowa. In 2007, the most recent data available, 60 percent of Iowa farmland was rented or leased in crop-share arrangements, compared with 43 percent in 1982.

The record land prices have prevented the Dykstras from acquiring more land, so they expanded their hog business instead. Yet livestock is a riskier proposition. This year’s drought has driven up feed costs for producers, and hog farmers aren’t protected by crop insurance like grain farmers.

On the day of the farm auction, Matt Dykstra said there wasn’t any sense in driving to the sale a mile away and mingling with “millionaires and billionaires” to bid on something he couldn’t afford.

Checking Pigs

“I’m not going to waste my time,” he said, heading out to check his pigs. “I’ll do something to make money.”

For his neighbors who aren’t in farming, prospects for the future are even more uncertain. Workers at the AdvancePierre Foods meat processing plant in Sioux County, O’Brien’s next-door neighbor to the west, know what it’s like to be stuck on the outside.

For 31 years, Cathi DeVos worked at the plant in Orange City. She started packaging hamburger meat on the production line. Eventually she landed a human-resources position, handling the paperwork for co-workers being cut and helping them determine their eligibility for food stamps. Ten months ago, it was her turn.

“At this point in my life, I was not ready to be without a job,” said DeVos, 61, who was let go as Cincinnati, Ohio-based AdvancePierre downsized and her department shifted to a new payroll and time-management system.

Worse Off

DeVos, who has applied for dozens of jobs, says she knows there are “many, many, many” people “much worse off” than her. Her husband, a truck driver, still has his job.

AdvancePierre plans to shutter the plant by the end of this year, eliminating more than 300 jobs. It follows the loss of 111 paychecks at Nemschoff Inc., whose Sioux Center facility made chairs for the health-care industry before it closed Sept. 15.

Such losses stagnate wages and widen the income gap, said Peters, the Iowa State sociologist. Even if the AdvancePierre workers find new jobs, their wages won’t be “nearly the rate they were making in their previous jobs,” he said.

Small Iowa communities have been the biggest losers in the concentration of land ownership. The victims range from hair salons to machine shops. Even school bus routes are affected. O’Brien’s declining population eliminated two of them at Sheldon Community Schools.

Empty Buses

“Our buses used to be full,” said Robin Spears, the superintendent. “We now have so much room in our buses that we have enough space to pick up kids in town who used to have to walk to school.”

In Sheldon, where the pungent odor of the town’s soybean- processing plant is the smell of money, economic stress is kitty-corner from Citizens State Bank.

It’s here, at 8th Street and 3rd Avenue, that business surged 42 percent last year for the local recycling center. Toni Ginger, owner of the Corner Can Redemption, said she has the sputtering economy to thank for the Mountain Dew and Coca-Cola cans, each worth 5 cents, overflowing in cardboard boxes.

Some who used to bring in the plastic bottles and aluminum cans as donations to the local Boy Scout troop aren’t hauling recyclables for charity anymore. They need the extra cash for themselves, they’ve confided to Ginger.

Regulars scavenge ditches on the side of the road — the same county byways that line the fields yielding gold for the farmers who own them.

Synopsis: Gen Re’s Rick Marinara discusses a case where a Gen Re second opinion helped a man with coronary artery disease place at standard.

A Second (Risk) Opinion After a Coronary Event

December 02, 2014| By Rick Marinara

Can a man in his 50s with a history of heart disease ever be considered better than a sub-standard risk for life insurance? The answer is, sometimes, YES.Here’s an example. John Smith, now age 52, believed he was in great health; why not? He went to his gym a couple of times a week, did yard work and golfed almost every weekend, skied a few times every winter, and felt fine. But two years ago, after mowing his lawn, Mr. Smith felt poorly. He rested and felt better the next morning, but later while walking his dog, the uncomfortable feeling returned, and now included a discomfort in his chest, “like a heavy weight pressing down on my chest.”

He was admitted to the hospital ER and after undergoing some cardiac tests, a heart attack was suspected and invasive treatment suggested. Mr. Smith didn’t need a coronary artery bypass, but one of his arteries was blocked enough to require angioplasty and a stent.

Eight months after Mr. Smith’s procedure, he had lost 17 pounds, improved his diet and cholesterol, was routinely working out at his gym and walking for exercise on other days.

He wasn’t sure what to expect when applying for life insurance, and the company to which he applied did feel his history would require charging a significant increase in premiums for a 50-year-old male.  However, as a Gen Re client, the carrier forwarded all its tests and medical records to us in the hope of improving the risk assessment. Gen Re is an industry specialist in the underwriting of coronary artery disease.

In fact our review of the records provided by the hospital, cardiologist and primary MD included favorable reports, including EKG testing since his event, and other insurance tests were assessed positively.  With this information, Gen Re was able to assess this risk more favorably than the primary carrier, who was then able to offer a reinsured policy with a rating acceptable to Mr. Smith.

That wasn’t the end of the story. A year later, Mr. Smith applied for rate reconsideration with his company, which supplied Gen Re with an updated report and medical records. With continued compliance with lifestyle changes and follow-up testing, Gen Re’s experienced  review determined Mr. Smith’s premiums could now be reduced further – to a frate class. Sometimes it pays to get a second opinion.


The recent advent of space tourism has more than a few of us updating our bucket lists and averaging out cost/time ratios but before you lift off, you should take a careful look at your life-insurance policy to make sure it’ll pay out if you die during your journey. Last week, in an article published by Reuters, author Alwyn Scott pointed out that unlike private pilots and skydivers who are forced to pick up extra life insurance to cover their added risky behavior, space tourists have not yet had to do this. This is soon to change though, says Scott, who argues that the current loophole is just an oversight on the part of insurance carriers.

Spacesuit? Helmet? Life insurance? Space tourist loophole may end

By Alwyn Scott

NEW YORK, Nov 5 (Reuters) – While private pilots and skydivers have to take out extra life insurance to cover the added risk of their pursuits, space tourists do not need special policies on their high flying rides.

That loophole is likely to disappear, slowly, after the fatal crash last week of a test flight of a Virgin Galactic space ship designed to take tourists into space.

The loophole exists because U.S. life insurance policies don’t ask about space tourism or exclude it from coverage, meaning insurers most likely would have to pay if the holder died on a space trip, insurance industry veterans said.

Insurance companies, which say they are considering what to do about space tourists after the Virgin crash, are likely to start adding questions about space travel and may even explicitly exclude space coverage, the industry observers said.

The companies themselves are taking a cautious approach.

“If we had an applicant with such plans, we would postpone any underwriting decision until they returned,” Prudential spokeswoman Sheila Bridgeforth said.

Northwestern Mutual said that it is paying close attention to the issue after the crash, but that there is too little safety data to assess the risk of space tourism. U.S. life insurer MetLife said it doesn’t have imminent plans to offer space tourism insurance.

Still, the industry is starting to gear up for sparce tourists, just as they cover satellite launches. Pembroke Managing Agency offers a policy that pays up to $5 million per space passenger or up to $20 million per trip, according to parent Ironshore International, which announced the policy in June.

“I suspect in insurance company offices all over the country right now – as a result of what’s happened to the Virgin Galactic plane – it’s being discussed,” said Burke Christensen, former insurance lawyer and chief executive who has authored or edited three textbooks on insurance law.

It would take time, perhaps years, for those changes to be approved by all U.S. state insurance commissioners, he noted.

In deciding what to charge, insurers are likely to look at satellite policies, which range between 2.5 percent and 10 percent of insured value, Neil Stevens, a space insurance expert and member of the UK’s Satellite Finance Network advisory board.

At that rate, a policy paying a million dollars would cost $25,000 to $100,000.

“Getting on a space flight is a material change in risk,” he said, akin to strapping rocket boosters onto a car and asking for a new policy. “Put yourself in the place of the insurer. Would you charge the same premium?”

But the data on human space travel is much more favorable, if limited. There have been no fatal suborbital manned flights and three fatal orbital space shots, including the U.S. space shuttles Challenger and Columbia with 14 deaths, and a Soyuz flight that killed one, according to the Seradata SpaceTrak database. That puts the risk of fatal accident on a manned orbital or suborbital spaceflight at 3 in 306 or just under 1 percent, the company said.

Given those numbers, and the few people who are likely to fly on rockets, “you come up with a very, very, tiny, tiny probability” of death, Christensen said, and the company might conclude it is not worth charging extra.

RISKY BUSINESS

Virgin Galactic’s SpaceShipTwo broke up after its release from a launch plane high over the Mojave desert on Oct. 31, killing one of two pilots. The craft is designed to carry six passengers on two-hour suborbital flights, including a few minutes of weightlessness.

Virgin’s space program, backed by founder Richard Branson and Aabar Investments, a United Arab Emirates investment fund, is the most developed of several projects to develop space tourism, with about 800 deposits for a ride into space at up to $250,000 a seat. Singer Lady Gaga and actor Ashton Kutcher have signed up.

Other companies developing space ships include privately owned XCOR Aerospace and Blue Origin, a startup owned by Amazon.com Inc founder Jeff Bezos.

While current life policies probably would pay in the event of death, applicants for new policies should disclose space plans or risk a dispute with an insurer, said Steven Weisbart, chief economist at the Insurance Information Institute, a non-profit trade association.

Insurers typically have up to two years after a policy is written to contest the application, allowing them to investigate whether the insured person has misrepresented facts.

So it’s possible an insurer could avoid paying if someone bought a policy and died in a rocket crash during the two years period.

“You know that insurers are going to look for some way to invalidate the claim if you had a ticket,” said Glenn Daily, a fee-only insurance adviser based in New York.