Although the U.S. economy appears to be cooling, the farmland market is cooking.

Farmers, investors and even Wall Street hedge funds are looking to farm country, searching for a safe haven for their money.

"We're teetering on the edge of a recession," Don DeWaay of DeWaay Capital Management in Clive said Friday at a land investment expo in West Des Moines.

Yet, despite the slowdown in the overall U.S. economy, DeWaay said, it might be a good time to buy farmland, but he urged potential buyers to be cautious about how much they pay for it.

"There will be a peak" in the farmland market, DeWaay said. "The good times don't last forever."

Another speaker at the land expo, Moe Russell, president of Russell Consulting Group, said higher prices for corn and soybeans, increasing farm production costs and double-digit growth in farmland prices have combined to make farming riskier than ever.

"The risk has increased about 16 times in the past few years," Russell said.

Despite the higher risk, Russell said, he is bullish on agriculture.

"If you do the right things, you'll be successful," he said. "If you don't, you're history."

Diversification is a key for investors looking for a place to put their money, he said.

"If you don't own farmland, look for some," Russell said. "There are good deals and bad deals. Do your due diligence before you buy."

Iowa farmland prices set a record in 2007 for the fifth year in a row, according to Iowa State University's annual farmland survey in December. Prices rose to an average of $3,908 an acre, 22 percent more than 2006. It was the largest one-year increase since 1976.

Other surveys have shown farmland prices also are on the rise in the eastern and western Corn Belt.

Although farmers are the largest buyers of farmland, the ISU survey said, some new players are entering the market.

Blackrock, a New York-based investment firm partially owned by Merrill Lynch, announced last year it had started a hedge fund to buy British farmland.

Individual investors may face more risks, including short-term volatility caused by everything from farm policy and trade wars to the weather.

"I always tell clients the first rule of investing applies: diversification," said Jeffrey Conrad, president of Hancock Agricultural Investment Group in Boston. The group manages a $900 million portfolio for pension funds and other large institutional investors.

The group's holdings include macadamia nuts, corn, wine grapes and wheat in the United States and Australia. "If you have the capital, you can manage the traditional farming risks," he said.

Double-digit growth in farmland prices has attracted "a tidal wave of investors," said Murray Wise of the Westchester Group Inc. in Champaign, Ill. It acquires, markets, and manages farmland for investors, and has more than $500 million in client assets.

"It's everybody from the person concerned about the stock market to large government and corporate pension funds, insurance companies, hedge funds," Wise said. "Lots of East Coast (and) Chicago investment firms want to have a piece of U.S. agriculture."

Wise said the land boom has longer-term roots. Caloric intake has skyrocketed in China since 1990 as its middle class grows. The developing world's demand for better diets will put increasing pressure on global food production, he said.

"We're on a modest collision course with demand for grain," Wise said.

Wise predicts farmland will appreciate 6 percent to 12 percent annually during the next three years. That's on top of average annual farm income of 4 percent to 5 percent.

Farm Editor Jerry Perkins can be reached at (515) 284-8456 or jperkins@dmreg.com