Farmland Barometer - January 2013

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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?
In 2010 farmland was at $8,000 per acre. Last year ended at $10,500 per acre. This year it’s $12,750 per acre - - up 21%. This is an amazing 66% increase since 2008 financial crisis began. All types of farmland are rising in value across the Midwest.

Who’s Buying the Land?
Agriculture is enjoying prosperity and farming families put their money where their mouth is. In 2012, farmers purchased over 50% of the land that came on the market. The rest of the farmland was purchased by non-farm owners and investors of all types. We are seeing lots of local investors who are interested in smaller tracts of land (can you believe an 80.0 acre tract is a million dollars!).

What about the 2012 Drought?
The driest and hottest temperatures in decades (practically since record keeping began in 1895). Unbelievably - - this is the third sub-par growing season back to back. Or - - have we gone into extreme weather conditions and global warming? Crop insurance saved the day for many farmers and landowners as it protected significant profits with the season ending high corn and soybean prices. Crop insurance payouts are record large and more than filled in the yield deficits. Plenty of money flowing.

What are Interest Rates Doing?
Both farm mortgage and operating loans are at historically low levels. You can borrow 15 year farm mortgage money for less than 41⁄2% - - unbelievable! Many people are locking in their long-term interest rates understanding they are extremely low. Someday interest rates will rise to combat upcoming inflation. The outlook is for several more years of these low levels - - otherwise the economy would be harmed.

Talk about the Fiscal Cliff!
Agriculture normally is treated well by Washington politics - - but all of us are sick of the gridlock, deficit spending, and the general level of bickering. The United States financial situation is precarious. Fortunately some concerns about dairy prices caused Senators and Congressmen to extend the farm bill through September 30th. We have one more year without major changes - - but the timing is terrible. And in September - - the Congress will be in a horrible budget battle - - just in time for implementing a long term farm bill!

Compare Farmland with Other Investments!
You have all seen our comparison of farmland - - to a basket of other investments in the United States. We averaged a combined return of 10.77% over the last 40 years. The stock market’s performance has been 6.42%. Investors worldwide find that to be attractive. In reality - - farmland is the new world currency. With a stable dividend and a long-term record of appreciation - - lots of people are finding farmland to be an incredible investment. At some point money could flow out of farmland into the stock market and other investments again - - but we don’t see that happening in 2013.