Recently there has been a run up in demand and pricing for farmland. Paul Joerger, area vice president for Farmers National Company in Overland Park, Kansas, which specializes in farmland buying and selling, says recent farm profits have played a role as farmers are using the profits that have been made to purchase more farmland. Another factor is with the financial unrest in Europe many investors are looking to put money in tangible assets and Joeger says that farmland is a good investment.
"We've seen the stock market go up and down here in the last month, you can lose as much as you gain in the same week," Joerger said. "What's nice about farmland returns, cash on cash usually is in that 3% to 5% range right now. We see a lot of 4% and that's a positive number and it just stays there, and then you always have the appreciation on top of that. So we have found it to be a great investment for a lot of people."
With the dramatic increase in the price of land, many farmers are wishing they had bought land about a decade ago. Despite the increase in prices Joerger says that purchasing land is a good idea as he thinks long-term that agricultural land prices are going to continue higher.
Strong commodity prices and high land values are also creating a hot rental market for farmland. Farmers National Company reports that across the Corn Belt, cash rents are up for 2012, and some rents are reaching stratospheric levels.
"I'm aware of cash rents of $600 in Iowa," said Jerry Warner, chief management officer for Farmers National. "I don't know if that is the highest. There does seem to be a lot of rents between $400 and $500."
Warner says the highest rents occur when farmers compete head-to-head for land and that increases of 25 to 45% compared to 2011 are being seen.