But it doesn’t stop there. According to a Business Week online article by Alan Bjerga, the increase in farmland prices does not stop at the US northern border; “the promise of a Canadian Corn Belt has helped push farmland values nationwide up 27 percent from 2007 to 2011, to $1,610 an acre…. The northward creep of the Corn Belt is turning Canadian farmland into a long-term investment play on global warming, says Tom Eisenhauer, president of Ottawa-based Bonnefield, a farmland investment firm that owns 15,000 acres across the country.”

In some cases in both the U.S. and Canada, those paying these prices are neighboring farmers while in others it is people looking at farmland as an investment. In either situation, the factors driving the willingness to pay higher prices are similar:

High crop prices,

Low interest rates that make investments in bonds unattractive and the taking on of farmland mortgages at these prices possible,

A possible increase in taxes on long-term capital gains in the US provides incentives for land holders to sell land, and

Federal Crop Insurance which can provide stable returns in the case of low prices or production problems.

In addition, high prices have provided some farmers with the cash that they need to continue investing in the purchase of additional acreage.

For US northern tier and southern Canadian farmland, global warming and the introduction of new short-season corn varieties that yield well has allowed high-priced, higher-yielding corn production to supplant the growing of wheat and other small grains.

At the same time, it can be argued that high land prices are driven by underlying fundamentals. In the Farm and Dairy article, “Farmland value and rent outlook 2013,” author Barry Ward writes, “with strong balance sheets in spite of the drought, many farmers will continue to be in the land buying mode. The Income Method of Capitalization, an appraiser’s method of valuing assets, yields high land valuations based on 2013 projections for returns to land and interest rates….

“For example, using a $287.50 per acre ‘return to land’ (the midpoint of the projected soybean ‘return to land’ for 2013) and a 4-percent capitalization rate, farmland would be appraised (valued) at $7,187.50 per acre.”