Increasing Land Values Lure Investors

The U.S. and global recession has taken its toll on stocks and many traditional investments. Many traders and investors seeking a safe haven for their money have turned to gold and U.S. Treasury Bonds. Others have found solid returns by investing in farmland.

In its annual report on farmland values, the U.S. Department of Agriculture (USDA) found a 6.8 percent increase in the value of farmland from 2010 to 2011. USDA put the average value of farm real estate at $2,350 per acre, with cropland values at $3,030 per acre and pastureland values at $1,100 per acre.

Farmland values have outpaced stocks and many other investments since September 2008 when the stock market plunged at the beginning of the recession. Analysts believe farmland values are supported by the growth in demand for food, spurred by the rising middle class in countries like China and India.

USDA's latest report on farmland values shows prices varied considerably last year depending on region. The report shows a whopping 15.9 percent increase in the Corn Belt region, while farm real estate in the Southeast declined 2 percent over the same period.

On average nationally, pasture values were up by 1.9 percent, at $1,100 per acre, but again, changes varied by region. Pasture values declined in the Southeast by 8.4 percent, while values in the Corn Belt and Northern Plains regions each increased by 6.6 percent.

Further declines in both farmland and pastureland are expected over the next year in drought-hit areas such as Texas and the Southeast. Investors who help drive farm real estate values are unlikely to be lured to areas damaged by drought and other natural disasters. The impact of the drought on real estate values may remain for an extended period of time.

To read the full story from Bloomberg Markets Magazine on farmland values, go to www.bloomberg.com/news/print/2011-08-10/being-like-soros-in-buying-farm-land-lets-investors-reap-16-annual-gains.html.

Reprinted in part from Drovers CattleNetwork