The market for farmland is having its biggest revival in almost 30 years as Asian demand for corn and soybeans and the ethanol industry drive commodity prices to record highs. From Iowa to South Dakota to Wyoming, gains in rural land prices have ranged from 78 percent to more than 200 percent, according to farmers and data from Farm Credit Services of America in Omaha, Nebraska.
Farm values probably will rise at an annual rate of 6 percent to 10 percent in the next five years, said Murray Wise, the chief executive officer of Westchester Group Inc., a Champaign, Ill.-based manager of $550 million of global farm tracts. The median U.S. home is forecast to gain 1.2 percent through 2010 and stay below the 2006 peak of $221,900, the Mortgage Bankers Association in Washington said.
''It's just crazy out there right now,'' said Mac Boyd, 65, a real estate broker at Farmers National Co. in Arcola, Ill., who has sold farms for more than three decades. ''The land market has never been stronger. Never been stronger.''
College endowments, pension funds and real estate fund managers are buying land even as U.S. homebuilders dump thousands of undeveloped parcels. The five largest home construction companies reported $2.6 billion of land-related write-downs in their most recent quarter.
''There is a real transition from financial assets to real assets,'' said Don Lindsey, the chief investment officer of George Washington University's $1.1 billion endowment. ''Farmland is certainly one of them.''
Corn prices climbed 80 percent in the past year and soybeans advanced 86 percent. Corn will average $7 a bushel in the year ending Aug. 31, 2009, and rise to an average of $8 a bushel in 2010, Morgan Stanley said in a report published last month. Corn futures for July delivery rose 5.75 cents to $7.09 a bushel this week on the Chicago Board of Trade.
Westchester Group bought a 2,150-acre farm in December southwest of Springfield, Illinois, when farmland went for $5,000 to $6,000 an acre, said Randall Pope, the company's president. Now the market is at $6,500 to $7,000 an acre, he said.
''There's no shortage of potential buyers,'' Pope said. ''That causes pretty intense competition when something comes on the market.''
