No one needs to tell farmers what's happened to the value of farmland in the last five years.

The accompanying chart clearly indicates the explosive uptrend that accelerated during 2007 and 2008.

One can argue that some of the large increases in Georgia were due to development property close to Atlanta and other major cities, but no matter how you slice the pie, from 2004 to 2008 farmland values everywhere were up 75 percent to 100 percent.

The question now, of course, is will this trend continue? My short answer — the bull market is over but the risk on the downside is still very small. Here is why.

Everything moves in cycles

It is interesting as we look back over just the last 10 years. Ten years ago the high tech industry was flying high and everyone thought that was the place to be. That market collapsed in 2001.

Three years ago the majority of the public was convinced that housing prices could never come down. Anyone who bought homes at that time or vacation property may well have bought a 30-year top.

But agriculture has been immune to these outside factors and, in fact, farmland values have seen the steadiest long-term growth of almost any asset value.

On the negative side, after logging record farm incomes in 2008, that certainly is not going to happen again in 2009. Incomes are going to be down.

In my opinion, crop prices will finish the year lower than where they are now, input prices are up and, therefore, profit margins are going to be squeezed for many producers. This is going to keep bidding at auctions from farmers at a minimum and will likely result in some softening (maybe 10 percent) of land values as well as some softening in cash rents.

But there are more positives than there are negatives for farmland values. In order to have a sharp drop in asset values, you must have forced liquidation sales. In order to have forced liquidation sales, you have to have high debt.

That happened in the mid-1980s in farmland value when debt was high and interest rates were high — farmland values plummeted. The same scenario unfolded in the housing market in the last three years.

But this time around, interest rates are low and farm debt is also low. Consequently, farmland values will not mirror the collapse of the last three years in the housing market. A little softening, maybe — but no major bear market.

Another positive factor for farmland values is an investment in farmland is now viewed as a “safe haven” by non-agricultural investors. The day of megabucks moving into mutual funds is over. There are substantial amounts of cash in the United States and around the world looking for a place to park — and farmland is on everyone's list.

Typically speaking farmers and investors buy farmland for one or both of two reasons. One reason is to make money farming the land and another reason is speculative return. The big speculative return, in my opinion, is over. But many farmland purchases can be made today that still provide positive investment returns.

Treasury bills are yielding nothing right now. Thus, many will view a 2 percent to 3 percent return on farmland as a good deal. Farming is definitely the place to be.