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by Stewart Truelsen

Tired of watching their hard-earned money evaporate in stock market investments like Enron and World Com, some investors have discovered farmland as a tangible asset. A good example of this was the enthusiastic turnout for the Farmland Investment Fair held in Joliet, Ill., and sponsored by The Chicago Farmers, an organization that includes farmers, landlords and agribusiness.

While the fair was in progress, Jeff Martin, event chairman, said, "We’ve got a record turnout compared to the last 10 years. We’ve had over 100 walk-ins and we had around 250 people pre-register." Admittedly, the attendees were not all novices. In fact, some were sellers of farmland looking for other opportunities to buy. Under Section 1031 of the Internal Revenue Code, property exchanges can result in the deferral of capital gains tax.

The 1031 tax deferral exchanges are considered one of the reasons farmland prices are rising, and anything rising in value is bound to get the attention of outside investors.

After sitting through a seminar on Farmland for Beginners, one suburban Chicago man remarked, "It sounds like a great life if you are in it, but it looks like one of those investments that keeps taking money out of your pocket." A farmer smiled and nodded.

Indeed, involvement in farming is not for the fainthearted. A team of farm lending specialists made it clear that historically farmland hasn’t been a great investment. They went on to list some of the variables that could affect that investment – changes in farm programs, environmental laws, interest rates, taxes, markets for agricultural products and so on. By the time they were through, the investment looked a lot more risky.

For investors willing to absorb even more risk, the foreign real estate market beckons. "There’s a lot of economic opportunity down in South America, primarily due to the land prices and labor costs," said Philip Corzine, general manager of South American Soy. "The last farm we bought in Brazil we paid $204 an acre for a thousand acres, virgin land, 65 percent of it will be farmed eventually." The farm is in the north central part of Brazil.

Some investors actually wanted to get their hands dirty, and one of the opportunities at the fair was raising alpacas on a small acreage. Alpacas are related to camels and llamas. They come from South America and are prized for their wool.

"At the moment the money is really in breeding stock because the herd in the United States is only about 60,000, so that’s not enough to be commercially viable from a wool point of view," said Bob Sash of Tiskilwa Farms Alpacas in Tiskilwa, Ill.

Martin said he answered about 40 phone calls in the two weeks prior to the farmland fair, from people with no prior experience, asking questions about investing. That’s a mixed blessing for farmers. Higher land prices make it more difficult for young farmers to buy land. However, lower land prices are usually indicative of a declining farm economy. Martin, an agricultural producer himself, told callers to be patient and take the time to learn more about it.