Everyone Wants Security, As Farmland Prices Go Parabolic

pigfarm tbi

Earlier this year and late last year, there was a steady drumbeat of investment gurus telling you to “buy farmland” as a protection against war, inflation, and whatever else.

It seems investors have taken the message to heart.

The price of high quality farmland is now generally in the rage of $5,500 – $7,000 per acre in Iowa and $6,200 – $7,500 in Illinois.

“There was a dramatic jump in the last 60 days,” says Loyd Brown, the president of Hertz Farm Management. He says land prices have been rising since 2009, but the biggest increase has occurred in the last 2 months.

Brown sells land to farmers, investors and investment firms. He noticed there was a steady and significant jump when, in a sequence of three auctions he held, land prices jumped up $500 per acre for top quality land.

Most of the buyers are farmers, around 60%-70% of the market, he says. The rest are investment firms and individuals.

“Individual investors usually have a background in farming,” he says.

He thinks prices are increasing because of low interest rates, the lack of good alternative investments and because a lot of people want tangible, conservative assets.

“A lot of people just like buying something that produces food, fibre and fuel,” he said.

The influx of new buyers and financially strong farmer buyers have driven high quality land prices back to their peak price, which Brown says was in July 2008. Medium quality and lower quality farmland is still selling for 5 to 10 per cent less than in July 2008.

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