Farmland Barometer - January 2011

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What's Driving Farmland Values?

Let's take a quick look at the positive forces that are pushing the prime farmland value trend upward: It is a complex world & lots of factors are involved.

Farm Income - Is the primary driver as both farmers and investors have money to invest. A 4% cash return is very attractive!

Energy - Higher gasoline prices are related to the overall price of crude oil. Ethanol and agriculture will follow along.

Value of the Dollar - Our declining dollar supports commodities and therefore farmland values. The dollar decline is expected to continue.

Interest Rates - Long term mortgage money is relatively cheap. Interest is a cost, so low interest rates are beneficial to land prices. It's a good time to borrow!

Alternate investments - Farmland produces an excellent cash flow and appreciates in value (approximately 6.2% per year). No other investment compares.

Inflation Threat - Our sovereign debt crisis and deficient spending all point toward severe inflation. Farmland is an excellent hedge against inflation.

Estate and Capital Gains Taxes - All of us dodged a bullet when Congress extended the Bush era tax cuts in December. Federal capital gains taxes are preserved for two years at the current rate of 15%. And, the estate tax exemptions allow a family to pass $5 million per spouse (up from $3.5 million in 2009). Both of these events are positive for landowners and Agriculture's future.

In Summary At Heartland Ag Group Ltd., we are bullish on farmland values! Our farm products are needed as food, feed, fuel, and fiber across an ever-expanding demand base. World grain stocks are at a low ebb - - and commodity prices should remain strong for several more years. Crop yields are responding positively to technology and good farming practices. Our profit picture looks remarkable!

Look for prime farmland to push higher from the pressures of increased profits as well as intense interest from investors and farmers around the globe. Higher prices for farmland will continue in 2011.

Comparing Farmland to other Financial Assets

Here is a quick comparison of how farmland compares in its overall return over the past 40 years -- it's the best!!

Assett/Index 1970-2009
Avg. Annual Return
Avg. Annual Return
Farmland 10.25% 10.40%
Mtg./REITS 9.00% 10.43%
Aaa (Bonds) 8.32% 6.85%
10 yr. Treasury 7.30% 6.42%
Dow Jones 6.42% 6.66%
S & P 500 6.24% 5.75%
CPI 4.36% 3.69%
PPI 3.98% 2.27%
CRB Spot Index 3.25% 2.40%

2010 Prime Farmland Sales

Prime Farmland values shot up 14% across Central Illinois in 2010. Our data shows the jump from early 2010 sales and year ending 2010 farmland values. Farmland went from $7,000 to $8,000 per acre!

Early 2010

Sale Date County Acres $/Acre
Dec. 2009 Logan 80.00 $6,875
Feb. 2010 Macon 124.71 $7,050
Feb. 2010 Piatt 47.24 $7,100
Jan. 2010 Christian 120.00 $7,000
Jan. 2010 DeWitt 81.28 $7,200

Late 2010

Sale Date County Acres $/Acre
Dec. 2010 Macon 53.32 $8,300
Dec. 2010 DeWitt 115.69 $7,950
Sep. 2010 Shelby 80.00 $7,600
Dec. 2010 Christian 120.00 $8,100
Jul. 2010 Moultrie 40.00 $8,025