(Chicago Tribune) The auctioneer stood in front of 30 bidders and a few dozen spectators who crowded into a community building one rainy night this week, his rat-a-tat-tat bid-calling going higher and higher.

On the block were two tracts of land near Stanford, including one 36-acre chunk considered prime farmland. Bloomington farmer Herb Kaufman had his eye on it, but other bidders pushed the price out of his comfort zone.

By the time auctioneer Mark Metzger called the last bid Tuesday, history was made: the 36 acres sold for $420,000. That's $11,519 an acre, believed to be a record for McLean County.

"That's too rich for me," said Kaufman, settling for the larger but less valuable tract at $6,364 an acre.

Farmland prices are on the rise at auctions and private sales across the Midwest, with buyers lured by high commodity prices and low interest rates -- and the possibility of better returns than other investments.

The average value of "good" Illinois farmland rose 11 percent between January 2010 and 2011, the Federal Reserve Bank of Chicago reported. One loan officer said prices in Central Illinois are up 25 percent since last fall.

The pace of that growth has caught the eye of regulators, who are leery of potential bubbles in the wake of the housing crisis. The Federal Deposit Insurance Corp. today is hosting a symposium near Washington, D.C., noting the farm sector's vulnerability to a reversal of market conditions or a rise in interest rates.

"The lending and borrowing decisions made now, when collateral values are high, will shape credit performance down the road," FDIC Chairman Sheila C. Bair said in a statement.

There's leeriness in Central Illinois too, but also skepticism about farmland as the next bubble.

Gary Schnitkey, an agriculture economics professor at the University of Illinois, said he would get concerned if interest rates began to rise or "something very unusual" happened, like a trade war that pinched off imports and exports.

"Given where we're at both on returns and interest rates, it doesn't look like a bubble to me," he said.

Many of today's buyers in Central Illinois are farmers themselves who have some extra cash from selling crops at high prices, though some investors are in the mix too, observers say. The concern for regulators would be that farmers could take on too much debt as they gobble up more and more expensive land.

But David Klein, managing broker at Soy Capital Ag Services in Bloomington, which sells and manages farms, noted that the Chicago Fed reported the average loan-to-deposit ratio in late 2010, about 72 percent, was the lowest level in seven years -- a positive sign. Farm loan repayment rates also improved.

Joe Springer, a vice president at 1st Farm Credit Services based in Morton, said there is concern the pace of farmland price increases could reverse. But each farmer's situation is unique, he said.

"It's a risk, don't get me wrong. But they're not leveraging themselves to the hilt to buy this stuff," he said.

Kaufman, the auction buyer, said he, too, is concerned about the possibility of a bubble. He delivers to the Stanford elevator sometimes, so he was familiar with the land being sold by the Nafziger family estate. Not counting the acres that are not tillable because they are wooded, he paid about $8,200 an acre, he said.

"This was kind of in my price range," he said. "You just have to make sure you don't overextend yourself."

The $11,519 price is a record, but Springer cautioned its smaller size and location drove up the price. The buyer declined to comment but was defined by the auction's organizers as "a local investor."

Klein's firm sold the previous record-holder -- $10,150 an acre for farmland located northwest of Normal -- just last month. Klein said Kaufman's $8,200 price for the larger tract "falls more in line with what we would say is market representative."

"If commodity prices decrease, it wouldn't surprise anyone if farmland values decrease too," Klein added.

Diane Nafziger of Indianapolis said her father, Norlan, who died last year at age 88, would be happy with Tuesday's turnout. He had farmed at least part of the land since the 1930s.

"The $11,500 (price) really surprised me," she said.

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