Talk of bubbles or crashes hasn’t put a dent in the farmland market, and if the end is nigh — nobody is blinking.

Farmland is “gold I can eat” to Steve Romick, a heavyweight investor and managing partner at FPA Funds. Farmland purchases have moved far beyond the agriculture industry, with insurance agencies, specialized investors, foreign firms and pension funds all throwing elbows in a bidding war.

Romick, in an interview with Forbes, answered the “Why farmland now?” question by comparing it with the gold market:

“I don’t know how to value gold. I don’t know if it should be a thousand dollars an ounce, the rough cost to pull it out of the ground, or $1,600 an ounce, where it is today, or whether it should be $2,000 or God forbid it’s $4,000 because government may take it away from you …

“I look at farmland. Farmland has increased in price. But farmland, interestingly, will benefit from the same things that gold will benefit from. If there’s inflation, farmland will benefit. If there’s a decline in fiat currencies, particularly the U.S. dollar, farmland will benefit. Ag prices are denominated in dollars. So if the dollar drops by 50 percent versus the won, for example, in Korea they can buy twice as much or their economy can benefit by not having to spend as much for the same amount of food.”

Traditional investments often have been anemic and the poor returns have helped carve a channel for new dollars to flow toward cropland; dollars that would have typically gone elsewhere.

The rise in farmland prices and the pace of sales is brisk, with the Midwest leading the spike. Iowa, South Dakota and Nebraska have doubled their 2005 farmland values. Iowa acreage averages $8,296 per acre, reflecting the confidence in corn and commodity demand, and an Iowa farm recently went for $21,900 per acre. In 2012, a Swiss bank bought 9,800 acres of Wisconsin cropland for $67.5 million. UBS AgriVest Farmland Fund Inc., a Connecticut-based farm real estate fund, is expected to close on a $108-million bid for 29,000 farmland acres in Wisconsin and Texas, according to Farmland Investor Letter.

The value of the purchases is dizzying and the number of investor players beyond ag is growing. Midwest farm values get the most attention, but coast-to-coast, the same cropland value pattern is evident. California is a prime example, where farmland values grew to $7,200 in 2012. Almond acreage in Tulare County can bring close to $20,000 per acre.

When the music stops

Will investors continue to park their money on farmland? “Farmland is lower risk and probably higher returning than commercial real estate, timberland, bond funds and equity funds,” Prudential’s Charles Allison told the L.A. Times.

Risk and investment always ride together in an inherent partnership, and certainly, farmland can’t continue the meteoric rise of the last few years, but it’s likely the price ceiling will be hit with a whimper and not a bang.

However, Blake Hurst, a Missouri farmer, writing in The American, believes farmers have taken on too much debt and the risk of a farmland crash is growing: “The ripples from a crash in farmland prices would not have the long-lasting effects on the economy that the subprime debacle did, but the chance of a crash in farmland prices should still concern policymakers. Farmers may well be collateral damage in the quantitative easing battle and are rightly worried that the next victim of our monetary policy will be wearing overalls when the music stops.”

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