Investors see promise in America's farms; some bankers see a possible bubble

Money continues to pour into America's farmland, but not by those who actually till the dirt and plant the crops. The continually rising price of food worldwide and the lack of arable land on which to plant is driving the cost of corn, soybeans, wheat and other crops up, something rich investors who have never planted a seed say makes buying this land a sound investment. (Photo by Joe Raymond, The Associated Press)

In Iowa, the value of farmland has almost doubled in six years, while values of farms in Nebraska and Kansas are up more than 50 percent, reports AP's Bernard Condon. The price of corn in Iowa was at $4 a bushel one year ago. Now, it's at $7. Condon also writes that investors can collect money on farms while they own them, unlike owning other things like gold, art and oil, making land ownership more appealing.

Out-of-state investors are becoming commonplace at farmland auctions, especially in Iowa, where they make up 25 percent of buyers, double the figure from 20 years ago, Condon reports. Marisa Dallman, owner of Kansas Land Brokers, writes for landthink.com that this is the first time she's seen an entire article devoted to farmland, which is usually left out of real-estate industry news, in the National Association of Realtors magazine. She reports that most farmland never sees the open market because it's passed from neighbor to neighbor and down through generations. She also says one sector of investors are buying small tracts of land for possible use in future development opportunities.

There is also a danger that farm prices may be inflated, warns Thomas Hoenig, head of the Federal Reserve Bank of Kansas City. He told Condon that current prices may be in an "unsustainable bubble." Others don't see it that way. Perry Vieth, a veteran bond trader and owner of Ceres Partners, a private investment fund, told Condon he is buying for 71 investors. His company owns 65 farms and he has returned 15 percent annually to his investors. (Read more)