Demand for U.S. farmland is dramatically higher than a year ago, and everyone is watching closely for indicators of any market correction. Rising grain prices continue to make land a profitable investment. As a result, landowners are using profits to acquire land, and investors continue to take notice looking for opportunities.

“While 75 to 85 percent of land buyers continue to be farmers, interest among outside investors has risen,” said Lee Vermeer, AFM, vice president of real estate operations at Farmers National Company. “Despite the robust demand driving sales activity levels, reports show that lenders are taking a relatively conservative approach to lending. Strong profits the past few years have provided cash for farmer buyers, while investors are taking cash from other sources to rebalance portfolios.”

While commodity prices are keeping land values rising, supply of available land for sale is down 30 percent from historical numbers, according to Vermeer. High grain profits and high farm income are tied to the demand for farmland, driving prices up. Low interest rates are also working to keep prices increasing.

“The total crop from last year wasn’t what was projected,” said Vermeer. “The result was a limited supply which resulted in increased prices. We are looking ahead to continued strong commodity prices due to late spring planting. Early summer floods are reducing crop acres.”