It seems that since the first of the year, many producers are completing their 2011 farming plans. Decisions such as fertilizer, lime, seed and acreage are being determined to name a few examples.

As always, input costs will continue to squeeze the bottom line. When off road diesel fuel is selling for $3 a gallon in February, you have to wonder what it will cost during the planting, harvesting and growing season. No one can be sure, but input costs this year will probably be the highest ever.

Although, the argument can be made that commodity prices are at some of the highest prices ever, which is true for grain. Corn, soybeans and wheat are all valued at attractive levels. Actually, to some extent, even for grain producers, prices are too high causing an imbalance that could hurt the agricultural economy and the entire economy as a whole. Specifically, livestock producers that need to buy grain.

Also consider that when the bubble pops and grain prices do fall, they will fall overnight. However, input costs for producers and a box of cereal for consumers will be much slower to decrease selling prices. Time will tell. Until then, it is anyone’s guess.

As for the land values increasing due to high grain prices, that is occurring. Demand for U.S. farmland has jumped to a five-year high, spurred on by a profitable grain market and a boost in buyer interest from both farm operators and land investors.

While demand rose sharply during the last quarter of 2010, the supply of available farmland fell to historically low levels.

There are a number of factors driving this increasing demand, which probably will continue.

Jumps in commodity prices are increasing profitability of land as an investment. Landowners are using the profits to increase land acquisitions. They are investing in their own operations as land values are stabilizing and in many cases increasing.

Although increasing values are boosting the interest in farmland by investors, farm operators account for 85 percent of buyers.

Prices for quality land are at levels that are high or higher than they have ever been in most of the North Central Region including Iowa, Missouri, Minnesota, South Dakota and North Dakota. In many areas of Iowa, top quality land is selling in the $8,000 to $9,000 per acre range.

There has been a sharp increase in land transfers in the eastern region of the farm belt (Illinois, Indiana and Ohio). Strong commodity prices, historically low interest rates, a profitable harvest and other factors have driven land prices up as much as $500 per acre during the last quarter in some areas.

Prices in Illinois, for example, are coming in at $7,000 per acre on average for high quality land, and as high as $8,750 in certain parts of the state. Mid to lower quality property is selling at $4,500 per acre. Values in Indiana are up to $7,500 per acre, while those in Ohio are up to $6,300 per acre.

Although Pennsylvania is not considered in the farm belt as far as grain production, farmland is holding its own and increasing in value.

However, depending on the area of the state the rise in value is attributed to the ongoing and potential drilling for Marcellus gas rather than the agricultural value.

Luke Fritz is executive director of the Butler County Farm Service Agency.