Forget Gold, Buy Farmland

A new breed of farmer is shaking up the American heartland, reports USA Today. Rich investors with no ties to farming, are confident enough to wager big on some land, betting that it’s a smart investment because food will only get more expensive around the world.

These new “farmers” are buying fields around the country and though farmers still fill most of the seats at auctions, the newcomers, according to the article, are growing in number and variety — a Seattle computer executive, a Kansas City lawyer, a publishing executive from Chicago, a Boston money manager.

The value of Iowa farmland has almost doubled in six years. In Nebraska and Kansas, it’s up more than 50%. Prices have risen so fast that regulators have begun sounding alarms and farmers are beginning to voice concerns. In Iowa, farm prices rose 160% in the decade through last year to an average $5,064 per acre, according to Iowa State University.

“I never thought prices would get this high,” said Robert Huber, 73, who just sold his 500-acre corn and soybean farm in Carmel, IN, for $3.8 million, or $7,600 an acre, triple what he paid for it a decade ago. “At the price we got, it’s going to take a long time for him to pay it off — and that’s if crop prices stay high.”

At a recent auction of 156 acres in Iowa, the 50 or so farmers who showed up withheld their bids out of respect for a beloved local farmer who had rented the land for two decades and wanted to own it. But his final bid of $1.1 million was topped by a California insurance executive. In Iowa, 25% of buyers are investors, double the proportion 20 years ago.

At the same time, farmers are shifting more of their land to the crops with the fastest-rising prices, which could cause those prices to fall — and take the value of farms with them. When the government reported June 30 that farmers had planted the second-largest corn crop in 70 years, corn prices dropped 8% in two days.

Of course, U.S. farms can swing wildly in value along with the economy. Despite the fragile recovery, though, farm prices are nearing records now, capping a decade of some of the fastest annual price jumps in 40 years. ◆