Farmland Barometer - January 2012

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Q & A

At Heartland Ag Group Ltd., we appreciate the opportunities that we have to assist farmland owners with their management, acquisition, and sales of individual tracts of farmland. To share our insight into the current land market, we are highlighting the most often asked questions (and our responses) - - wonderful conversations:

What are Farms Selling For?
At Christmas 2010 prime farmland was at $8,000 per acre. We ended this year at $10,500 per acre. That is a 31% increase in 12 months - - much of it occurred in the first half of 2011. All types of farmland rose in value - - a rising tide floats all boats!

What’s Driving Farmland Values?
Farmland is what it earns - - the number one driver is $7.00 corn and $13.00 beans. Farmers and investors have money that they are willing to spend on farmland. The demand is up and safety of your investment weighs heavily on everyone’s conscience. Farmland becomes high on many of our list of investments.

Are We in a Bubble?
No! The factors pushing farmland are solid. We don’t see a lot of speculative buying, leverage, unstable commodity prices, high interest rates, or fickle land buyers who will turn around and re-sell the tracts. Many of the farmland purchases are cash transactions and very stable buyers.

Is Inflation a Threat?
Deficit spending and global sovereign debt issue make us realize that inflation is in our future. Governments are signaling that they refuse to reduce spending - - leaving inflation as the only pathway out. Inflation involves the velocity of money - - to date we have not seen large sums of money chasing goods and services general economy (only in agriculture land). There is lots of money parked on the side lines so inflation could become prevalent a few years out.

What are Interest Rates Doing?
These are historically and incredibly low interest rates for farm mortgages. 15 year locked in rates are around 4.5% - - unbelievable! This is an excellent time to lock in your long-term interest rates. Someday interest rates will rise to combat inflation. In the short term, our government officials do not want to raise interest rates - - it would harm the economy. Enjoy!

Who is Buying the Land?
Approximately 50% of the land is purchased by local farmers and their families. That is the traditional slice of the market. The rest of the land is purchased by non-farm owners and investors of all types. We are seeing local investors, pension funds, foreign investors, and lots of money wanting to be our new best friend!

What about Mother Nature (Weather)?
Yes - - we have just experienced two of the most undesirable production season in recent memory. History tells us a third year of extremes (back to back) is not likely. If Mother Nature cooperates, our corn and soybean yields should jump dramatically. We have the potential of 225 bushel corn and 65 bushel beans on a lot of our farms - - thanks to good farmers and great seed genetics. Look for rising yields in our immediate and long-term future.

Compare Farmland to Other Investments
Farmland has the best long-term investment return of anything on the planet - - averaging a combined return of 10.25% over the last 40 years. The stock market has put in a similar performance of 6.42% return. On a average farmland has increased 6.5% in value each year and produces a 4% dividend. Investors world-wide find that to be attractive. And it is very stable - - not a lot of volatile price movements.