The increase in farmland values over the past year continues to amaze both farmers and investors. And even more amazing is the fact that land continues to move quickly, despite the higher prices.

“What surprises us is the rate of increase over the last 12 months,” says Lee Vermeer, vice president of real estate operations for Farmers National Company, Omaha, NE. “Values are up 20 to 25 percent, compared to rises of five to 10 percent in 2010. We are looking for 2012 to be another profitable year for those selling land.”

A Reuters story identified northwest Iowa as the “epicenter” of the nation’s farmland boom. “A fortune is being plowed into the dirt of Sioux County, where well-heeled farmers and wealthy investors compete fiercely for some of the most fertile land in the Corn Belt,” according to the Reuters story. “While farmland prices across Iowa have been among the heartland’s fastest growing- up 261 percent since 2000 – they’ve more than tripled in Sioux County, rising faster than most of the state.”

If you’re thinking of selling farmland, it’s likely a realtor will encourage you to offer the land at auction. Farmers National Company, for instance, has seen record auction activity during the last six months as more properties are being sold at auction to maximize profits. Tight supply of quality land has also prompted buyers to look at less productive land that can be upgraded, Vermeer says. Strong grain prices are boosting profits for farmers, prompting them to pursue land in order to expand operations, In addition, cash rents in top production areas have increased 25 to 40 percent during 2011.

“Farmers make up 75 percent of the buyers in the market, despite continued strong interest from investors,” Vermeer says. “Land continues to be a tangible investment that has performed well, thus the demand.”

Late last year farmland prices reached record levels, with northwest Iowa setting the pace. Farmers say rich soil, favorable weather trends, a high concentration of livestock and biofuel operations, and an intensely competitive farming culture are driving factors. Top prices in Sioux County auctions hit $13,000 an acre for crop land two years ago, then last fall prices reached the $20,000 per acre level.

Top quality farmland in Iowa is averaging over $9,500 per acre, with Minnesota values at $7,500 per acre.

Such a run-up in land values has many worried of a potential bust, similar to the late 1970s and early 1980s.

“Not all dirt is the same. Some dirt is astonishing, compared to other dirt,” Jim Rogers, the billionaire commodities investor and author told Reuters. “But it ultimately comes down to economics: How much does that land cost, what crop can you grow on that land, what price you can get for that crop, and how much it costs you to produce that crop?”

Downward pressure on farmland values would result if commodities prices moved lower.

“Overall the upcoming year looks positive,” Vermeer says. “However, poor performance in the commodity market over the next year could bring downward pressure on land values. Good weather world-wide could result in a crop surplus, dropping prices. In addition, inflation would boost interest rates, negatively affecting land values.”