While the housing market is wracked by instability, price fluctuations and foreclosures, the market on farmland appears to be growing.

A report released earlier this week by the U.S. Department of Agriculture stated that the value of land and buildings on farms reached an average price of $2,350 per acre on January 1 of this year. That value represents a record high and an 8.8 percent increase over last year’s price of $2,160.

Farm real estate has proven even more valuable in Kentucky. According to the report, farmland was valued at $3,000 per acre this year in the state, compared to $2,850 per acre in 2007.

Also, the price of cropland in the state rose from $3,050 per acre in 2007 to $3,260 this year, and Kentucky pastures appreciated in value from $2,600 per acre last year to $2,700 per acre at the beginning of this year.

Altogether, the value of farmland and buildings in Kentucky rose from $26.22 billion in 2003 to $39.045 billion in 2007.

The trend of consistent annual appreciation in agricultural land value is mirrored in nearly every other state.

“Strong commodity prices and farm programs, outside investments, favorable interest rates and tax incentives continue to be the factors that drive farm real estate values to record levels,” the report states. “Livestock prices, recreational use and urban development remain the predominant influences that increase pasture land values.”

Mike Bullock, agricultural specialist with Bowling Green Technical College, estimated that farmland in Warren County has been selling for between $4,000 and $8,000 per acre over the past several months.

Bullock said the drastic elevation in land prices is tied directly to leaps in commodity prices, with fertilizer and grain costs more than doubling in recent years.

Kentucky farmers renting cropland are paying an average of $82 per acre, up $10 from the average rent in 2004, though Bullock said in many cases farmers in Warren County are paying significantly higher prices - and having to absorb losses due to lower crop yields caused by drought.

“A farmer who rents can’t go to a landowner and ask to pay half the rent for half a crop,” Bullock said. “If a farmer runs into a drought, they just have to take it. They’re paying for the fertilizer and the crops, so they’re at risk the most.”

Another reason for the rise in farmland prices in the state is the fact that it does not change hands as frequently as do properties in the residential real estate market.

Lonnie Gann, president of the Realtors Association of Southern Kentucky, said that the majority of farmland sales takes place at auctions, frequently because the families who own the farms are not continuing the business into the next generation.

Those farmers who aren’t opening their land to the market are acquiring additional acreage.

“Farmers have to acquire more land and operate on a larger scale to maintain profitability,” Gann said.

Donald Dunn, county executive director for the Warren-Edmonson Farm Service Agency Office, echoed Bullock’s estimate that the state average value of $3,000 per acre is below what owners in Warren County can get for their farmland.

In addition to attendant increases in prices for grain and other commodities, Dunn said the high land values are tied to oil drilling and mineral exploration in the area.

“If you strike oil on your farm, and I’m living next door, you better believe the value of my land is going to go up,” Dunn said.