There’s a good chance that farmland values could drop at least modestly in the coming years if interest rates go up or commodity prices fall below trend-line projections of $4.50/bu. for corn and $10.50/bu. for soybeans, as some experts expect.

“We anticipate land prices to fall over the next three to seven years,” says Liddell of Rabo Agrifinance. “Our most clear and present danger is interest rates.”

Schnitkey sees little reason for concern in the short term. “Farmland values could drop, but I don’t see that happening in the near term,” he says. “Commodity prices are hanging in there and interest rates are low. Something pretty dramatic would have to happen to see a 30% drop in land values.”

If interest rates rise after the Federal Reserve’s plan to hold interest at today’s historically low levels expires in 2013, interest-rate bugaboos could come into play.

“If interest rates would go up two percentage points, that would conceptually mean a 30% fall in land prices,” Schnitkey says.

The strength of commodity prices is another critical factor that will determine the rise or fall of farmland values. There’s considerable downside potential as recent high prices attract more resources and higher production, says Dobbins of Purdue.

“If you were a pessimistic person, you could put together a pretty dire scenario of what could happen to crop prices and thus to land values,” he says. “I am absolutely convinced that these high crop prices will result in a worldwide response to increase corn and soybean production. It is fairly likely that supply will overshoot demand.”