Summer is typically a slow time for land sales, with the bulk of auctions and brokered sales occurring in the post-harvest and pre-planting timeframe. However, as the temperature has risen this summer, so have the number of sales. Not only are the frequency of sales higher this summer, the prices are hot as well. There have been reports of multiple sales of over $10,000 per acre, with a recent sale in Champaign Co. bringing $13,500 per acre.
As we have discussed here before, it is a combination of factors currently driving the market. Corn and bean prices, while having cooled off in the last week or so, are still hovering around historically high levels. For the farmers that have dodged the severe weather so far this year, they are shaping up to have a very profitable 2011 crop year – meaning they will have money to reinvest in their operation. Investors, whether it be a hedge fund, a pension, or in individual, are looking to farmland as a safe, reliable place to park money and still get a respectable return. Even with the number of sales picking up, there remains a lack of overall supply of available farms. Low supply, combined with the high demand from the previously mentioned buyer groups, is advancing the farmland market at a rapid pace.
One can only speculate how long this bull market will last. It seems that with the ever-increasing worldwide demand for food (and U.S. crops) the underlying fundamentals appear strong to keep corn and bean prices around their current levels for the foreseeable future. As long as this is the case, there is going to be opportunities to make money in agriculture, which will continue to fuel the farmland market.
Want to read more on this topic? Take a moment to read a recent article in Time – America’s Hottest New Investment: Farmland
