Farmland prices are soaring in 2011. According to a recent New York Times article, Iowa farmland has gone from around $2,000 an acre in 1990 to a whopping $6,000 this year — and it’s still rising. Farmland prices are in fact so high that the Federal Reserve of Kansas City is worried. A 30% year-over-year rise in Nebraska land prices has come from high crop prices, booming farm income and record-low interest rates, according to the KC fed.
The reasons are clear. The Kansas City branch of the Fed sums it up nicely by crediting booming crop prices — the price of corn has soared more than 60% in the past year or so and soy prices are up more than 20% in the past year to tally a three-year high — and the resultant jump in farm revenue. Few businesses are a sure thing these days other than agriculture.
Another perk for farmland investors is the inflation hedge, since farmland is very closely correlated to the rate of inflation.
So how can you get a share of the farmland boom and cash in on the big business of farming in the U.S. right now? Calling up a real estate agent in the Midwest, of course, is your best way to get a direct play on this trend. But real estate isn’t a very liquid asset and can come with its own unique version of hangups — interest rates, credit markets and other difficulties brought into the harsh light of day thanks to the financial crisis.
So for investors looking for a few alternative ways to plow for profits amid rising farmland prices, consider these three investment options: