Farmland Rockets

March 01, 2011

Well, I believe it is official. Farmland is now the “Cinderella” of the financial ball. The Wall Street Journal’s numerous articles details farmland’s positive future. Farmland is now attracting investors ranging from farmers to large investment funds. Farmland experienced another year of substantial appreciation, as well as providing a great cash return. In a time when other investment types continue to provide investors with heartburn, farmland has provided a refreshing alternative.

During 2010, Central Illinois farmland values appreciated approximately 13- 15% and returned 3-5% of value in rental income. Farmland appreciation and income resulted in a total return of 16-20% during 2010. The average price of prime Central Illinois farmland documented at the end 2010 was $8,030 per acre, compared to $7,100 per acre at the end of 2009. Farmland values have continued this upward trend into 2011. Land values have risen another 15-20% since January 1, 2011. Sales of prime Central Illinois farmland are consistently selling for over $9,000 per acre, and sometimes exceeding $10,000 per acre.

Inflation appears to be a major concern of many investors and rightfully so, with the magnitude of Quantitative Easing (QE), i.e., government stimulus. Gold has been receiving a lot of press due to the perceived inflationary hedge it provides, but Warren Buffet stated in a recent interview that he would rather have all the farmland in the United States and seven Exxon Mobiles than all the gold in the world (both options are of similar value). Farmland can provide the safety of gold and, at the same time, provide an income stream.

We keep abreast on many of the current issues facing rural landowners, these trends and topics are highlighted in our “Field Notes” newsletter. Below are some key topics for owners and farmers.