ST. PAUL, Minn. - Farmland values continued to rise last year and are once again reaching all-time record levels, according to a survey I conduct annually on bare farmland sales.

However, the recent increase across the 14 Minnesota counties surveyed was only 0.8 percent.

I often receive requests for this information from across the state, although all counties surveyed are in southwestern Minnesota.

Surveyed counties include: Chippewa, Cottonwood, Jackson, Lac Qui Parle, Lincoln, Lyon, Martin, Murray, Nobles, Pipestone, Redwood, Rock, Watonwan and Yellow Medicine.

Data from these counties indicated prices increased from an average of $3,702 in 2008 to $3,733 in 2009, or an increase of 0.8 percent. This increase is significantly smaller than last year's 30 percent increase.

There was a lot of variability from 2008 to 2009. The largest increase was in Lac Qui Parle County with an increase of 26.8 percent while Cottonwood County experienced a decline of 36.7 percent.

Four of the counties experienced declines in farmland values. The two counties with the largest declines, Cottonwood and Lyon, were those with the largest percentage increases from 2007 to 2008.

Assessed values became closer to sale values. Historically, the assessed value would be 75 percent to 80 percent of the sales value, but the survey showed the new average for the 14 counties increased to 94.78 percent. Three counties experienced average sales prices that were less than the average assessed values.

There are several factors that have an effect on land values. Farm income, grain prices, interest rates, return on other investments and 1031 exchanges are often mentioned as reasons for the increase.

Farm profits continued to be good in 2009 although down slightly from the year before. In 2008 profits were good, but not at record levels. This trend will probably continue, depending on good corn and soybeans yields.

Many livestock producers experienced a tough year in 2009, with losses instead of profits due to poor prices for their commodities and high feed costs.

How high can farmland values go? Supply and demand will determine this. The simple return on investment, determined by rental rates, will determine how competitive farmland is compared to other investments.

If interest rates rise or farm rental rates fall, the value of land is sure to be affected in a negative way. Barring those scenarios, the price of farmland will continue to climb.

If producers would like a copy of a two-page document on the trends in farmland sale prices and they live in one of the 14 counties surveyed, the document is available at no cost at University of Minnesota Extension county offices.

If producers reside in another Minnesota county and would like the document sent to them, contact University of Minnesota Extension at (507) 372-3906 or bauxx003@umn.edu.

David Bau is an ag business management educator with University of Minnesota Extension.