U.S. Farmland Price Update August 2010

To see the Midwest farmland price report for the year 2011 click here.

To see all of my posts about Farmland Prices go HERE.

I haven't done an updated thread on farmland prices since last February. Here are links to some articles I've run across since then.

For those "investors" interested in this thread, I continue a cautionary outlook on farmland investing. There are too many contra-indicators historically to warrant a dive into owning farmland as a "sure bet" during this deflationary environment. Any student of the Great Depression knows that it is not a "sure bet". A diversification, yes. If you've got all of your other bases covered.

It's all in the timing.

I have written more on this topic previously so will not go into it farther here. See: Agriculture is a Bubble Ready to Pop, and Farmland Investment Still Premature.

Today, I've also done an article on international and institutional farmland investing here.

[NOTE THAT FARMLAND NEWS PRICE UPDATES WILL BE DONE EVERY THREE MONTHS: FEBRUARY, MAY, AUGUST & NOVEMBER.]


DOMESTIC

USDA Reports:

USDA: Land Values and Cash Rents 2010 Summary August 2010 (PDF)

August 2010 USDA Report: The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $2,140 per acre on January 1, 2010, up 1.4 percent from 2009. Regional changes in the average value of farm real estate ranged from a 4.9 percent increase in the Northern Plains regions to a 3.3 percent decline in the Southeast region. The highest farm real estate values remained in the Northeast region at $4,690 per acre. The Mountain region had the lowest farm real estate value, $911 per acre.

The United States cropland value increased by $30 per acre (1.1 percent) to $2,700 per acre. In the Northern Plains and Delta regions, the average cropland value increased 6.9 and 6.1 percent, respectively, from the previous year. However, in the Southeast and Mountain regions, cropland values decreased by 5.3 percent and 5.0 percent, respectively.

The United States pasture value was unchanged from 2009 at $1,070 per acre. The Southeast region had the largest percentage decrease in pasture value, 5.6 percent below 2009. The Northern Plains region had the highest percentage increase, 3.8 percent above 2009....

Nationally, cash rents per acre paid to landlords for cropland in 2010 rose $3.00 (3.0 percent), while pasture rents remained unchanged. Cropland cash rents averaged $102.00 per acre, compared with $99.00 per acre for 2009. Pasture cash rents averaged $11.00 per acre, consistent with the 2009 price but above the 2008 price of $10.50. The increase in cropland land rental rates are the result of producers receiving strong commodity prices, while pasture cash rent is affected less by commodity prices and more by land values.

The Appalachian region had the highest percentage increase for cropland, 7.6 percent above 2009. Cropland cash rents increased $2.50 per acre to $71.00 in the Northern Plains region and $3.00 per acre to $152.00 in the Corn Belt region. The Corn Belt and Northern Plains regions account for slightly more than one half of cash rented cropland acreage in the United States.

The major corn and soybean producing states of Illinois, Indiana, and Iowa experienced increases in cropland cash rents. Illinois increased 3.7 percent to $169.00 per acre, while Indiana and Iowa both increased approximately 1 percent to $141.00 and $176.00 per acre, respectively.

While pasture rent in the Northern Plains remained unchanged from the previous year, rents in the Southern Plains increased by 10 cents and rents in the Mountain region decreased 10 cents. The Northern Plains, Southern Plains, and Mountain regions account for nearly 83 percent of the cash rented pasture acreage in the United States. The cash rent paid for pasture in the Corn Belt region decreased $1.50 to $29.50 per acre, which is the highest cash rent paid for pasture in the United States.

USDA tallies foreign-held agricultural land USDA tallies foreign-held agricultural land

8/2/2010 - USDA’s Farm Service Agency (FSA) has released the latest report on foreign holdings of U.S. agricultural land. The publication contains statistics through Feb. 28, 2009, regarding the 22.2 million acres of U.S. agricultural land in which foreign persons hold an interest.....The publication reports that foreign persons have an interest in 1.7 percent of all privately held U.S. agricultural land and 0.98 percent of all land in the United States. This is a 1.3 million acre increase from 2008...

Federal Reserve Reports:

The Agricultural Newsletter from the Federal Reserve Bank of Chicago May 2010: FARMLAND VALUES AND CREDIT CONDITIONS (PDF)

May 2010 - The year-over-year increase in farmland values was 4 percent in the first quarter of 2010 for the Seventh Federal Reserve District. There was also a quarterly increase of 2 percent in the value of “good” agricultural land, according to the April 1 surveys returned by 215 District bankers. At 1 percent, the growth in District farmland cash rental
rates slowed down dramatically from 2009. The demand to purchase farmland during the first quarter of 2010 strengthened from a year ago. A rising share of purchases by farmers buoyed this demand. However, the amount of farmland for sale, the number of farms sold, and the acreage sold weakened in the first three months of 2010 relative to the same period in 2009. The vast majority of the bankers anticipated
stable land values during the second quarter of 2010.

.....Agricultural land values increased 4 percent for the first quarter of 2010 compared with the first quarter of 2009. However, the year-over-year gains in the value of “good” agricultural land were restricted to the southern part of the
District. Farmland values increased 4 percent in Illinois, 7 percent in Indiana, and 8 percent in Iowa. Wisconsin farmland values decreased 1 percent. For the first quarter of 2010 relative to the fourth quarter of 2009, District farmland
values rose 2 percent, with only Illinois having an increase of less than 2 percent.

While farmland values edged higher, cash rental rates for agricultural land plummeted, rising just 1 percent in 2010. Cash rental rates in Illinois were unchanged from 2009. The rest of the District saw increases in cash rental
rates: 3 percent in Indiana, 1 percent in Iowa, and 8 percent in Wisconsin (in part reflecting a rise from a low number last year).....

Farmland Values Rise 4% in Seventh District

5/26/2010 - Farmland values rose 4% year-over-year according the Federal Reserve Bank of Chicago’s May AgLetter, due to strong demand from farmers and greater availability of fund for lending. The Seventh Federal Reserve District reported quarter-over-quarter farmland values increased 2%. However, the amount of farmland for sale, the number of properties sold, and the amount of acreage sold was less than first quarter of 2010.

...In the Seventh District, farmland values rose 4% compared to the first quarter of 2009, with values increasing 4% in Illinois, 7% in Indiana, and 8% in Iowa. Wisconsin farmland values decreased 1%. Quarter-over-quarter values were very strong in the first quarter of 2010 as overall values rose 2%. Farmland values increased 4% in Indiana, 3% in Iowa, 2% in Wisconsin, and 1% in Illinois compared to the last quarter of 2009....

Midwest:

IOWA

Pretty picture painted for ag

...Dale Torpey, president of the Federation Bank of Washington, Iowa, and president-elect of the Community Bankers of Iowa, said prime farmland near his town recently sold for $8,000 an acre....Great Western acquired 69 TierOne offices, and one objective is to expand agricultural lending from those offices, said Tony Arthur, head of agricultural lending for the Bank of New Zealand, also a division of the National Australia Bank. Great Western also wants to acquire other farm-oriented banks in the Midwest, he said. “We’ve found a home in the Midwest.”

Investor interest keeps Iowa farmland values stable

7/2/2010 - “We are seeing values on the top quality ground at or even above the peaks we saw in 2008. “In some cases, it’s beyond that point, above the $7,000 per acre mark. The market for these properties is strong and, based on economic indicators, we project that to continue.”

....A huge divergence in prices exists in Iowa and Minnesota. Sam Kain, area sales manager for Farmers National, said high quality land is bringing up to $7,000 an acre or more in Iowa and nearing $6,000 in Minnesota, while lower quality parcels are drawing minimal interest and coming in at much lower prices.

....A report from the Federal Reserve Bank of Chicago found that good quality Iowa farmland rose in value by 3 percent during the last quarter of 2009 and 4 percent during the entire year.

Farmland value on the rise in North Iowa

4/21/2010 - The value of North Central Iowa farmland is continuing to climb, according to a recent survey done by a state realtor institute. The North Central Iowa region saw a 3.7-percent increase in the value of quality farmland during a six-month period ending in March. The increase-a value determined by the results of the March 2010 Land Trends and Values Survey sent out by the Iowa Farm and Land Chapter No. 2 of the Realtors Land Institute-means the region has seen a total 4.9-percent increase in the last year....

IOWA FARMLAND: According to the Federal Reserve Bank of Chicago, farmland value in the state is rising

3/3/2010 - A survey by the Federal Reserve Bank of Chicago shows the value of good quality Iowa farmland rose by 3 percent during the last quarter of 2009 and 4 percent during the year... despite a 35 percent drop in farm income last year, farmers have financial cushions after a run of several good years....

Demand boosts farmland value across NW Iowa

2/13/2010 - At a recent auction, a 120-acre farm just south of Le Mars sold for $8,200 an acre -- more than $2,500 above the estimated average value for Plymouth County land. More than 100 people attended the sale, with 10 bidding at least once, auctioneer Bruce Brock said. Across the region, competition for good-quality farmland has helped stabilize values, which fell last year after more than a decade of healthy gains. "The market has come back strong," says Brock, whose firm, Le Mars-based Brock Auction Co., has six offices in Iowa and South Dakota. "We get one or two calls a day, four or five times a week from people looking to buy land."...

Ethanol investors sell land in Pleasantville to farmers

.....Iowa farmland prices roughly doubled from 1999 to last year and then stalled as commodity prices dropped from record levels. Iowa State University's land price survey released in December showed land prices down 2 percent for the year, at $4,371 per acre. Prime Iowa farmland still goes for $5,000 per acre and more, farm real estate agents report. The Pleasantville ethanol plant had attracted some local opposition, focused primarily on the fact that the big facility and its noise and truck traffic would overshadow the town from directly across Business Highway 5, which runs along the northeast part of town.

The Pleasantville City Council and Marion County supervisors had given their official blessings to the project. But the same squeeze on the ethanol business that put the kibosh on plants in Atlantic, Boone, Fort Dodge and Des Moines caught Pleasantville. "These banks are running scared of ethanol these days," said Nevada cattleman Bill Couser, a director of Lincolnway Energy in Nevada and one of the contenders for the Des Moines site.

Southwest Iowa Auction to Include 2,139 Acres, Selling in 22 Tracts

2/8/2010 RED OAK, IA Approximately 2,139 acres of land in southwest Iowa will be offered at auction in two events set for Feb. 25 and 26, with Schrader Real Estate & Auction Company marketing the properties and conducting the auctions. ..."Combined, these two events will make up one of the largest offerings of farmland in southwest Iowa in recent times," said Schrader sales manager Roger Diehm. "The land being sold on Friday will include a good mixture of productive farmland with wooded draws that have excellent hunting potential in areas of the state that are well known for turkey, deer, pheasant and quail," Diehm said....

Demand boosts farmland value across NW Iowa

2/13/2010 - LE MARS, Iowa -- At a recent auction, a 120-acre farm just south of Le Mars sold for $8,200 an acre -- more than $2,500 above the estimated average value for Plymouth County land. More than 100 people attended the sale, with 10 bidding at least once, auctioneer Bruce Brock said. Across the region, competition for good-quality farmland has helped stabilize values, which fell last year after more than a decade of healthy gains. "The market has come back strong," says Brock, whose firm, Le Mars-based Brock Auction Co., has six offices in Iowa and South Dakota. "We get one or two calls a day, four or five times a week from people looking to buy land."...

OTHER MIDWEST

U.S. Plains farmland values rise in first quarter

The value of farmland in the U.S. central Plains, a major livestock and wheat crop region, rose 2 percent in the first quarter of 2010, boosted by strong demand for farmland and improved livestock incomes, the Federal Reserve Bank of Kansas City said on Friday.

"Cropland values were above year-ago levels, driven primarily by farmer demand, as well as non-farm investors seeking higher rates of return. Ranchland values rose with improved profitability in the livestock sector," the regional Fed bank said in its quarterly survey of area bankers. The Fed's tenth district stretches across Colorado, Kansas, Nebraska, Oklahoma, Wyoming and parts of New Mexico and Missouri....

Cash cropland: Ag land holds value Prices dipped in 2009, then recovered (Minn.)

While home values fell and commercial development land plummeted 60 percent in value, southern Minnesota’s rich farmland has held its value....A decade ago, land there was selling for an average of $1,663 per acre. In 2009 it was selling for an average of nearly $4,500 per acre. The highest quality land continues to sell for even more. “Most good, bare farmland will bring $4,000 to $5,000 in this area and it can bring $5,500,” Thiesse said.

Marion County Farmland Assessments to Be Up Another 10% in 2011 (Illinois)

The Marion County Farm Land Assessment Committee has approved a ten percent increase in assessed valuation for farm land in the county for the 2011 property tax year....farmland is now selling at over three-thousand dollars and sometimes four-thousand dollars an acre.

Four Wisconsin Farms Sell for $2.8 Million as Buyers Focus on Quality

8/2/2010 - Farmland buyers continued their focus on quality Saturday, July 31, when four Wisconsin farms sold for prices as high as $6,667 per acre, according to Schrader Real Estate & Auction Company, which conducted the sale. The 771 acres brought a total price of $2,805,000, or an average of $3,638 per acre.....

U.S. Midwest farmland values rise but trends mixed

5/21/2010... Farmland values rose 4 percent in Illinois, 7 pct in Indiana and 8 pct in Iowa. Wisconsin values fell 1 percent. Compared to the fourth quarter of 2009, district farmland values rose 2 percent, with Illinois up the least, it said. After adjusting for inflation, cash farmland rents in the district actually declined 1 percent.

Food demand drives farmland prices

6/9/2010 - KANSAS CITY, Mo. — Prices are high for the world’s best farmland, passing $7,000 an acre in Nebraska and Iowa recently, because of strong world food demand over the next 40 years, an agricultural economist said here Tuesday. In fact, said J.B. Penn, chief economist for farm equipment maker Deere & Co., for the first time the world’s ability to produce is about to be overtaken by the need for more food, with the world population growing 50 percent by 2050....

Farmland: What’s Selling, Who’s Buying

4/9/2010 - ...Waddell reports that Class A farmland is selling from $7,500 to $9,000 per acre from north-central Illinois to the western edge of "Chicagoland,” and Class B farmland is in the $5,800 to $6,800 range. As you move farther south and west, there is still considerable support for Class A land from $6,900 to $7,700 per acre, while class B land is selling from $5,300 to $6,200 per acre....

Rural Mainstreet Report: Farmland Price Index at 18-month high

4/21/2010 - The overall Rural Mainstreet Index (RMI) decreased to 44.2 from its nearly two-year high of 47.4 last month, according to Creighton University’s April survey of bank CEOs in a 10-state region. The RMI currently sits below the growth neutral 50.0. The farm equipment sales index rose to an 18-month high of 57.2, and the farmland price index continued its rally to 59.5.

The confidence index, which provides an economic outlook six months from now, decreased to 45.6, which is the first time it has fallen below 50.0 in the last six months, and the lowest it has been since August 2009. The home sales index increased to 52.5, which is above growth neutral for the first time since 2007. The farmland price index increased to 59.5, continuing a four-month rally, currently at an 18-month high.....

Kalpa's note:
The current Goss report shows the following Farmland price indexes:
July '09 - 45.7
June '10 - 54.7
July '10 - 52.5


Rent on farmland a growing price to pay (Illinois)

4/3/2010 - In a year that farmland prices were soft, cash rent for farmland was hard. The U.S. Department of Agriculture’s National Agricultural Statistics Service has begun reporting on 2009 levels of cash rent for farmland in Illinois, and the numbers confirm that farmers here are in a “garden spot.” A very high-priced garden spot. Cash rent data for nonirrigated farmland puts Macon County at tops in the state with an average of $237 per acre, followed closely by Logan at $232, Sangamon at $223, Piatt at $218, and Christian and McLean at $206. For Macon, that is a $26 jump upward from $211 in 2008....

US crop program may reshape farmland values

CHICAGO, April 14 (Reuters) - U.S. farmer choices between two crop subsidy programs in 2010 will affect farm profits and even farmland values, according to a report published by the Kansas City Federal Reserve on Wednesday. The multi-year U.S. farm bill passed in 2008 allows farmers to receive price support payments for grain, cotton and other row crops through a direct counter-cyclical payment (DCP) program, which kicks in during periods of low prices. That program dates back to the earlier 2002 national farm bill....

As the housing boom dies out, land prices drop (Illinois)

April 4, 2010 - The Plainfield Sun - Michael Garrigan has seen the price of land plummet as much as 75 percent from a high of $110,000 an acre in the past couple of years. Garrigan, who has been Plainfield's village planner since 2002, almost can't believe how quickly prices skyrocketed, then crashed during his eight-year tenure. "I've seen the boom and the bust," he said.

From about 2002 through 2005, Plainfield was one of the fastest growing communities in the country. But the housing bubble burst, and what some are calling The Great Recession, sucked the life out of residential development in Will and Kendall counties, which were among the fastest growing counties in the nation. "Now developers are having property foreclosed on," Garrigan said. "That is unfortunately the new norm in this economy."

....Mark Schneidewind, manager of the Will County Farm Bureau, sees a similar pattern happening in "pockets" all over the county. Farmland that was selling for an average of $45,000 to $65,000 an acre in some areas is now going for $5,000 to $7,000 a acre, he said.....

Land values, rental rate continue strong

March 29, 2010 The Farm Land Values and Cash Rental Rates continue strong in our area. This is based on preliminary information from the University of Nebraska-Lincoln Ag Economics Department Annual Land Value Survey that was released last week. The survey represents the time from Feb. 1, 2009, to Feb. 1, 2010.

Land values are a bit higher compared to 2009. This year, the statewide average changed at 4.4 percent higher at $1,494 per acre for all land sold. That compares to a 0 percent change reported in last year’s survey. Platte County is located in the East Crop Reporting District. The east district’s for this year is up 10.1 percent compared to a 3.0 percent increase reported last year....

Indiana Farmland Auction Draws Crowd of 250, Resulting in $3.7 Million Sale

FAIRMOUNT, IN -- 04/22/10 -- Monday's auction of a 681-acre farm attracted a crowd of more than 250 people -- including 76 registered bidders -- resulting in a sale for a total price of more than $3.7 million. The outcome re-confirmed the recent strength in prices of quality farmland, according to Rex Schrader, president of Schrader Real Estate & Auction Company.

"The price per acre definitely indicated that farmland prices are higher than in the fall of 2009. Demand is strong, and the number of farms on the market remains at record lows," said Schrader. The local bidders dominated the early bidding, which reached a total of $3,067,000 on 15 individual tracts. After larger bidders began making offers on combinations, the final total came to $3,717,000....

Western MN Farmland Values Increase Slightly

2/22/2010 Western Minnesota farm land values continued to rise last year and are once again reaching all time record levels, according to a survey conducted by David Bau, University of Minnesota ag business management education. However, the 2009 increase was only 0.8%, compared to 30% in 2008....

Land leases more complex, tougher to negotiate

Mar 01, 2010. SALINA, Kan. —A disconnect between land values and farm rental rates is growing. Couple that with unprecedented market volatility, and the result is an increasingly difficult environment for analyzing or negotiating farm leases, according to a leading K-State ag economist. Increased use of cash rent versus crop share arrangements adds further complications, according to Kevin Dhuyvetter, a professor and farm management specialist.

“At one time, Northwest Kansas had less cash rent on non-irrigated cropland than anywhere else in the state, which makes sense because there’s a high level of weather-related risk,” he notes. “Today, there’s more cash rent there than in any part of the state. That’s because a few people started doing it, and it snowballed.”....

Vanishing farmland (Colorado)

4/25/2010 - The Rockies region is losing farm and ranch land that is integral to the region's economy, culture and environment, yet it would be incorrect to measure the importance of agriculture today solely by its contribution to regional economics. Farmers and their land are under intense pressure: Aging farmers and ranchers, whose average age has risen from 52 to 57 during the last 20 years, are often retiring without a younger family member willing to take over, thus too often removing multi-generation ranches and farms from production....

Prange Ranch sold ahead of auction (Colorado)

April 23, 2010 --GREELEY - The May 12 auction of the historic Prange Ranch was canceled after it was sold in a private transaction. "We were pleased that the planned auction attracted an early offer," said property owner Susan Beeson. "We had an interested buyer who was willing to make an acceptable offer, so we accomplished our objectives a bit earlier than we had expected."....

Colorado Governor signs bill protecting farmland

4/15/2010 - Gov. Bill Ritter has signed a bill limiting the use of urban renewal authority to take agricultural land. Lawmakers say Colorado is rapidly losing farmland and they believe urban renewal was never intended for taking more land away from farmers and ranchers. Lawmakers say the new law will require urban renewal funds to be spent in urban areas and not to expand community boundaries buying up agricultural land.

Southeast Colorado Auction to Include Dry and Irrigated Farmland, Grass Land and CRP Land

2/23/2010 - Approximately 8,724 acres of agricultural land near Springfield in Southeast Colorado will be auctioned on Wednesday, March 31, with Schrader Real Estate & Auction Company handling the sale. The land includes 5,400 acres of dry land, 1,500 acres of irrigated land, 1,300 acres of CRP land and 500 acres of grass land. It will be offered in 26 individual tracts ranging from 40 to 960 acres, using a bidding format that places large and small buyers on an equal footing, according to R.D. Schrader, vice president of the auction company.

Georgia Land Auction Draws Big Crowds, Resulting in Sale of 4,900 Acres Over Two Days

DUBLIN, GA -- (Marketwire) -- 04/16/10 -- Hunters, investors, timberland buyers and other bidders snapped up approximately 4,900 acres of land in a two-day auction of South Georgia forest land April 9-10, as two of the nation's leading land auction companies combined forces to sell the land for Rayonier. The sale, which included sessions in Waycross, Ga., on April 9 and in Dublin, Ga., on April 10, resulted in a combined sale price of more than $6.3 million in the Woltz & Schrader auction. The auction attracted capacity crowds on both days....

Florida land values continued fall in 2009

4/5/2010 - GAINESVILLE, Fla. — The steep decline in the state’s rural land values continued in 2009, but may level off later this year, according to the annual Florida Land Value Survey from the University of Florida’s Institute of Food and Agricultural Sciences. After years of price growth spurred by a population boom between 2002 and 2006, some areas of Florida lost as much as half their value in 2008.

The survey, which does not evaluate urban land values, sought to determine average rural land values as of May 2009. Results show that farmland in North Florida dropped between 3 and 17 percent in value from 2008, while areas in South Florida dropped between 10 and 31 percent....

Fewer Farms to Feed 'Local' Appetite - Small City Plots Foster a Sense of Agricultural Revival, but Fail to Make Up for the Steady Loss of Farmland in the Region (Sanfrancisco)

3/11/2010 - Pocket-size farms have sprung up in cities around the Bay Area in recent years, part of a movement to bring consumers closer to the sources of food they buy. But even as these small farms show up in urban neighborhoods, bringing with them a sense of a local agricultural revival, the continuing decline in the availability of farmland in the Bay Area's traditional growing areas threatens to leave consumers further away than ever from where their food is cultivated. In recent years, the region has lost large tracts of farmland to housing and commercial development....

Maryland Auctioneer sees continued depressed land prices

6/26/2010 - WASHINGTON COUNTY — Auctioneer Matt Hurley sold 99 acres of fields near Leitersburg to housing developers for $1.45 million four years ago. A few weeks ago, the highest bid Hurley could coax for the same undeveloped land was $320,000. The bid was rejected by AMK Partners LLC, the local investors who bought the former dairy farm in June 2006. Ronald D. Koontz and George E. Manger Jr., two of the three investors in AMK, declined after the auction to talk about the plunge in market value....

Texas land market weak, except irrigated cropland

2/19/2010 - While seeing signs the correction in Midwestern farmland values is over, the call is weaker for Texas rural real estate. Why the difference? The Texas market is heavily dependent on recreational demand and it’s clearly not yet healed. According to Charles Gilliland, research economist with the Real Estate Center (REC) at Texas A&M University, land values fell 5 percent statewide last year. That is the first decline since the early 1990s.

The decline marks the end of a run in appreciation that peaked in 2008, when the median price per acre reached $2,359—330 percent more than the median price in 1994. Gilliland estimates prices slipped to around $2,141 per acre last year and thinks prices will continue dropping in 2010. "The potential buyers are saying, ‘Why should I pay this today when I can pick it up cheaper next year?’"...

U.S. Plains farmland values firmed up at end-2009

2/12/2010 - Farmland values in the U.S. central Plains rose 2 percent in the fourth quarter of 2009 as crop prices climbed while ranchland values fell with livestock markets, the Federal Reserve Bank of Kansas City said Friday. The Fed's tenth district is a leading U.S. producer of cattle and wheat, corn and other top row crops. It stretches across Colorado, Kansas, Nebraska, Oklahoma, Wyoming and parts of New Mexico and Missouri. So land values, the main collateral for most farm loans, are widely watched as an economic gauge...

RENTS:
Farmland rental rates stable for 2010

June 2010 - Anyone who is involved with the rental market for Iowa farmland knows that rental rates were pushed significantly higher by the favorable corn and soybean prices that farmers enjoyed in 2007 and 2008. However, lower prices in late 2008 and 2009 seem to have taken much of the steam out of the land market. Results from the most recent Iowa State University Extension rental rate survey estimated that the average cash rent for corn and soybean land in the state for 2010 was $184 per acre, just $1 per acre higher than last year.

In effect there was no significant change in the average rents from last year when looking at the whole state. What did change, though, was the range of typical rents reported.For most areas the lower end of the ranges was higher in 2010, and the high end of the ranges was lower. This indicates that fewer extremely high rents (i.e. $300 per acre or more) were negotiated, but some landlords and tenants were still “catching up” on farms that were being rented at below average rates for the county....

Cash Crops: Buying Farmland for Income

By acquiring and renting out high-quality acreage, investors can book a 3% to 5% annual return from rental income and, over time, might rack up an additional 5% or so per year in appreciation, says R. Dennis Moon, managing director of specialty asset management at U.S. Trust, a unit of Bank of America Corp.

Farmland investing doesn't come without risks, though. In order to smooth out price fluctuations, investors are advised to hold their property for at least five years. And if a farmer who's renting your land goes bust and you can't rent out the land again quickly, even the income proposition gets iffy....