This time around, farmers aren't relying so much on borrowed money to buy land. "But my prediction is we'll set a new record in values in 2013 and we'll sell more land, so that leverage number is likely to increase," he said. "Keep an eye on that if you are bidding for land. And by all means, stay away from variable-interest-rate loans. When you are at a 60-year low in interest rates, you can bet the next big move is going to be up."
Plain says that crop values have probably peaked and we should expect declining prices for corn, soybean and wheat going forward. That will reduce income per acre and make people a little less aggressive in chasing farmland. If inflation increases, Plain says it's a good bet the Federal Reserve will raise interest rates.
"If you combine falling crop prices with rising interest rates, we could see a decline or at least stabilization in farmland prices very quickly," he said.
Pastureland prices may rise as well
Pastureland hasn't seen nearly the run-up in prices that cropland has in recent years, but Plain says that may change.
"We have the smallest cattle inventory this year since 1952," he said. "It looks like we are going to see some increases in cattle prices that will probably push pasture values up in the next few years."
Plain says the same rules apply for pastureland: Be wary of variable-interest-rate loans and avoid getting heavily leveraged with a small down payment or you can quickly find yourself in a difficult situation.
Source: University of Missouri Extension