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Minnesota land tops out at $4,500 an acre

After spending months on the sidelines, investors are starting to return to the nation's agriculture land as a home for their investment dollars, according to an employee-owned agricultural real estate management company.

Investors have long played a role in the land-buying market, but toward the end of 2008 those once active investors retreated, according to Lee Vermeer, AFM, vice president of real estate operations at Farmers National Company.

"Investors stepped aside around November, but they have gotten back in the game," said Vermeer. "Everyone was trying to figure out the stock market and whether the economy had bottomed out. Some believe it has. Now that the uncertainty has subsided, buyers are looking for investments they can feel good about."

During the past six months, owner/operators around the country took advantage of the decline in investor attention and purchased available land to expand their operations. It was that activity that kept land values steady despite the turbulent economy.

"A good indication of the strength of the land market was that even with all the uncertainty and the stress on the market the past six months - land values held," said Vermeer. "I think that speaks to the quality of the land, but also shows the confidence today's buyers have in the land market as an investment opportunity."

Vermeer said the land market did slow somewhat last fall and there were some weak spots around the country the first part of 2009. He attributed the slow down to the drop in commodity prices. In the past 30-45 days, however, Vermeer said the market is gaining ground.

Farmers National Company is seeing strong buyer interest. In fact some land sales have been at the same price levels recorded in the middle of 2008.

There have been very few forced sales, according to Vermeer, resulting in land being in very stable hands.

According to Sam Kain, area sales manager for Farmers National Company in Iowa and Minnesota, the higher quality farm land in Iowa is holding its own, while the medium to lower quality farms have gone down in value.

"We have had a few high quality farms top the $7,000 per acre mark," Kain said. "The medium to lower quality land has retreated in some cases as much as 15 percent."

In Minnesota, the higher quality land is in the $4,000 to $5,000 an acre range, with very few sales over the $5,000 mark.

Mid-quality land in Minnesota is bringing in around $3,000 per acre.

"In Minnesota we haven't seen the decrease in prices that we are seeing in Iowa," Kain said. "Land values in Minnesota didn't increase as rapidly as those in Iowa, so land owners in Minnesota haven't seen the decline we are experiencing in some areas in Iowa."

Market and economic uncertainty has led some Iowa and Minnesota land owners to sit tight with their properties, resulting in fewer properties for sale at this time.

"People are confused and a little gun shy," Kain said. "Those with land to sell aren't sure what to do with the money if they do sell. As the economy improves we will start getting more calls from those who are ready to put their land on the market. Investors seem to be coming back into the market. After the recent turmoil in the stock market, they are seeing that land can be a safe investment."

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