Has Real Estate Lost Its Sizzle? Not on the Farm

[jpak]

http://www.nytimes.com/2007/03/04/business/yourmoney/04farm.html?_r=2&ref=business&oref=slogin&oref=slogin

SOARING crop prices, strong export markets and growing demand for biofuels are adding up to good times for many American farmers. So it’s not surprising that farmland, particularly in the upper Midwest, has begun to reflect that good fortune with rapidly rising prices.

The Fed can always print more money but it can’t create new farmland, which has generally been rising in value since the late 1980s. From 2002 through 2005, American farmland appreciated by roughly 50 percent, according to Agriculture Department data. Farmland’s traditional investment appeal includes steady income from rents, along with appreciation that has tended to run ahead of inflation.

But since September, Midwestern banks and real estate brokers report, land has become a torrid commodity, with prices in Illinois, Iowa and other nearby states climbing by as much as 20 percent. Tom Archbold, senior vice president for farm ranch and timber management at U.S. Bank in Fargo, N.D., speaks of a client who had land in Nebraska appraised at $3,200 an acre late last year. Three months later, it fetched $3,850 an acre at auction in Lincoln.

Apart from farmers, the biggest beneficiaries of the land rush have been well-heeled investors like pension funds and university endowments. The Hancock Agricultural Investment Group, for instance, manages portfolios of farm properties for large investors and reports returns of better than 20 percent for each of the last three years. But the minimum investment is $40 million.

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