Land values are up and don’t seem to be coming down any time soon.
Values of Midwestern farmland make a pretty consistent upswing, when depicted on a graph. From 1950 to last year, values for U.S. farm real estate (which includes all land, buildings and dwellings on farms), is almost a perfect arc up, with only a few small declines.
- Inflation: Plain says, like prices for other commodities, farmland values typically increase over time.
- Lack of alternative investments: Edwards says, in Iowa, agriculture is king and land is a sought-after commodity. What else would farmers with large incomes invest in?
- Limited supply: Only so much land in the U.S. is suitable for agriculture. "There just not making any more of it," Plain says.
- High corn and soybean prices: Edwards says demand for biofuels, livestock feed and exports have all help push prices up, which has increased the overall income of farmers.
- Low Interest rates: During the last few years, farmers have been able to easily obtain low-interest loans to purchase farmland.
- Favorable crop yields: Average corn yields, for example, have showed a strong increase over the last 100 years, Plain says, which has simultaneously increased average corn profit per acre.
- High degree of liquidity, equity capital: Edwards says because of high farm incomes, farmers have been able to purchase land without borrowing as much.