Farmers this spring are tilling the most valuable soil in their lifetimes to raise grain worth record prices.

Still, recreational and development buyers continue to drive land prices in Jackson County, as they have for two decades.

Even with record grain prices, only a few farmers have ventured into the real estate market. At an average $3,450 an acre -- up $1,000 since 2002 -- few farms are trading hands.

"With the price of farm machinery, fertilizer and seeds, a farmer can't afford $3,500 an acre," said Tompkins Township Assessor Harold Mann.

The costs of nitrogen and diesel fuel -- the lifeblood of farming -- have quadrupled since 2000.

Land for farming use isn't worth much more than $2,000 an acre, Mann said.

High grain prices and soaring land prices have triggered spirited competition for rented farmland. It is good for landowners but yet another increase for farmers.

"We haven't had any competition for land, until this year," grain farmer Grover Bailey said while preparing to chisel-plow a field on Cooper Road. "People came in on us and offered more for rent, so we had to pay more."

Bailey owns 350 acres near his farmstead on Territorial Road and rents 1,200 acres as far as 15 miles from home. He lost some rented land and added some this year.

"All farmers are looking at holding their acreage or expanding," said Eric Wittenberg, a Columbia Township farmer and research specialist for Michigan State University.

Once a farmer has optimized yields on his home turf, the only way to increase cash flow and to spread the cost of tractors, equipment and storage bins is to add land.

They rent the farmland, instead of buying, because developers and investors have driven prices out of range.

That's a problem for rural assessors such as Mann, who set land values for taxes.

"There are no sales of good farmland," Mann said. Instead, marginal farm acreage with swamps, brush and woods is being marketed to and purchased by hunters from the cities.

Government statistics for farmland values are not based on their potential value in agriculture, but for recreation and development, Mann said.

Rental values are riding high on pressure from alternative uses and from crop farmers.

"Most farmers were paying $50 to $60 an acre for rent, and now some of the bigger farmers are coming in and offering $100 to $150," Wittenberg said. "There are some hard feelings out there."

The hottest competition for Jackson County land is near the borders with Calhoun and Hillsdale counties, where bidding wars take place among the biggest farmers.

Some farmers range 20 miles from their headquarters to secure productive land.

At stake are the financial risks and possibilities of controlling more land in a booming grain market. More land also means more government support.

Corn, the region's biggest crop, recently hit a record $6 a bushel under the demand for food and ethanol.

Corn ground that generated $300 an acre two years ago could produce $700 to $900 or more this year. Prices for soybeans and wheat, the two other major crops in the region, also have doubled -- soybeans to above $13 a bushel and wheat at $8.

Serious cash is flowing both ways. Diesel prices hit $4 a gallon in March. Nitrogen and potash prices, along with propane for drying grain and natural gas for making fertilizer, also have doubled in a year. Anything made of steel has rocketed in price.

Local farmers say it will cost them $350 to $550 an acre to plant and raise corn. A mid-size grain farmer will put $500,000 on the line this spring and summer, and hope for favorable weather.

The prospect of even higher grain prices as demand and supply merge is tempered by memories of $1.50-a-bushel corn, $5 beans and $2 wheat just a few years ago.

"The grain market is pretty volatile. Every operator has to look at his own profit margin and pencil it out," said Robert Hannewald, who farms more than 2,000 acres in Waterloo Township.

Hannewald last bought land in 1993, for $750 an acre. He does not plan to buy now at three or four times that amount.

"Even at $750, it was hard to make the cash flow to cover the cost then," he said. "With land at four times that now, it still won't pay."

Wittenberg, too, said average grain prices over time will not cover $3,500 land and sustain profits.

That is why, according to the U.S. Department of Agriculture, farmers in Jackson County rent 52 percent of the acres they till. There are about 1,000 farms in the county, ranging up to 5,000 acres.

The boost in cropland rentals, and increased cash flow among farmers, are a considerable shot in the arm to rural communities. Three grain-to-fuel plants in Albion, Adrian and Blissfield offer a market that was not there just two years ago.

Based on the history of boom-and-bust in farming, the excitement is tentative.

Most farmers interviewed for this report take a conservative approach, figuring the market eventually will crash, or at least correct itself. They don't want to be left with big land debts, including property taxes that continue to creep upward.

"They always say the cure for high prices is high prices," Hannewald said.

"I call it self-cleaning action," Wittenberg said. "High prices lead to overproduction, which leads to lower prices."

For now, farmers, lenders and investors are high on farming. Farm income hit a record $87.5 billion in 2007, up 26 percent in one year, the USDA reported recently.

Agriculture stocks are strong because farmers are ordering more new equipment, seeds and fertilizer. Analysts say there is plenty of upside in farm stocks such as Deere & Co. and Monsanto.

The Spink family of Hanover isn't buying land or new tractors, but has installed a new center-pivot irrigation system. Brothers James and Ken and their father are the sixth-generation. Like their father, Elwin, did before retirement, they have full-time jobs off the farm.

"We are concentrating on the ground we have. It's just 200 acres but it is ours," James Spink said. He is a Blackman Township public safety officer and vice president of Jackson County Farm Bureau.

His brother is an aerospace engineer at Eaton Corp. and their father is a retired hydraulics machinist. They are among the half of all farmers who have jobs away from their farms.

"It is a lifestyle we can't get out of our blood," James Spink said. "Our focus is to maximize what we have on a smaller scale. We are not going to try to compete for more land."

The Spinks raise grain, including sunflowers for a niche market, and have irrigated their crops for years by hauling pipes into the fields. The center-pivot system, which rotates on wheels and irrigates from overhead pipes, will save time and irrigates more efficiently.

Back-up water is vital, especially on sandy soil, and meant the difference last summer between making and losing money. Part of the region received no rain for six weeks.

Farm acreage that is well-drained by tile, and land that is irrigated, are valued most by farmers.

Recreational buyers and developers generally buy marginal cropland that is swampy, wooded and hilly.

"I'm just closing on a farm for $3,000 an acre, but it's more for hunting than farming," said Phil Morgan of Good Earth Real Estate in Jackson. The client will not rely on farming to pay the loan, he said.

A proposed purchase of a Grass Lake farm by a developer fell through last year when the economy went sour, Morgan said. He sees little farmland hit the market.

The housing slowdown and factory closings in Michigan, coupled with an upswing in farming, will have a side benefit of slowing urban sprawl.

"When you can earn a living off the land, you will keep it," Spink said.

The market for rural building sites has tanked. Housing starts in Michigan are at the lowest level in 40 years.

In Grass Lake Township, where housing development had been sprouting since 1990, building permits peaked at 85 in 2003 and slumped to 11 in 2007, officials said.

Spirited competition for tillable land could slow urban sprawl for years to come. The intense jockeying might be hard for some to swallow, but is a sign of an active farm economy.

"I get a lot of calls from farmers who are upset that rentals have jumped so much in their areas," Wittenberg said. "Unfortunately, it is whatever the market will bear."