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Uncertainty fuels record land sale pace

Record prices aren't keeping farm land from selling at a record volume around the Midwest. And, the blistering pace of land sales in corn and soybean country isn't expected to slip much anytime in the near future, recent reports show.

Land prices have doubled in the last 7 years in Indiana, for example, with almost half that jump coming in the last 2 years, according to a report from Purdue University Extension ag economist and Center for Commercial Agriculture director Brent Gloy. Of 250 Indiana farmers, farm investors and ag lenders surveyed recently, the vast majority see the swift clip of land sales to continue at or beyond its current pace for at least the next 5 years. Of the farmers whose opinions were sought, 74% said they hope to pick up their land buying in the same time period.

"Some people are very positive about future values, and some have concerns," Gloy says in a university report. "Their wide range of possible prices is consistent with the current uncertainty surrounding the ultimate value of the farm. This variability of opinion creates the potential for large changes in farmland prices."

So far this year, sales activity has already gone through the roof, adds Lee Vermeer, vice president of real estate operations at Farmers National Company. So far, he says Farmers National sales volume alone has gone up 40% from a year ago, and that trend's expected to last at least through the rest of 2012. And, much of that trend has been rooted in the uncertainty Gloy found consistent in his survey results.

"Although across the Midwest the inventory of land for sale is still really tight, Farmers National Company is experiencing increased sales activity. The demand continues to be very strong with increasing prices even at current levels," Vermeer says. “I believe that sales activity will remain strong until some of the market uncertainties become known. People still see land as a safe, tangible investment and are willing to keep their money there over the long-term.”

Gloy adds that the tight inventory is actually adding fuel to the land value fire. "Until the supply of land offered to the market increases, it is likely that the people at the upper end of the demand curve with more optimistic views of farmland value will continue to push prices higher," he says. "How long this lasts will depend upon how these individuals' expectations evolve."

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