Smart people have figured out that making money means putting your money to work – and one of the best ways to do that is buying productive farmland. The land rush is on - and right now, as commodities explode in price, those smart folks who not only want to survive, but thrive and remain at the top of the heap are snapping up plots in America's heartland right and left. For example, while residential and commercial real estate prices are falling across the country, a plot of farmland near Ames, Iowa that was appraised in November 2010 at around $5700 an acre went for $8200 an acre in a recent auction. That a gain of approximately 30%!

What's also happening is that farmers are holding on to their land, since (as realtors will tell you), "they ain't makin' it anymore." Farm income is up for a change...and maybe that's just karma. Consider that before last Great Depression, during the boom times of the Jazz Age, people on the farms weren't sharing in that prosperity...in fact, the depression in farm country started a long time before the crash of 1929, and it did it sure didn't get much better after 1930.

And therein lies a warning...

As terrific as this all seems, there is always a chance of a sudden dive in the market. One of the reasons that farm families suffered so much during the 1920s while Wall Street had a party had to do with the fact that before 1920, prices on a lot of crops were very high – mainly because of the First World War. We were exporting a lot of food to the Allies before 1917 (since most young European men were fighting instead of farming), and once the Yanks got into the scrap, the U.S. Army became a big customer. In response, farmers, whose products had never been in such demand, bought more land and invested in new, mechanical equipment, anticipating that the boom would never end.

Of course, this was all bought on credit...then suddenly, the war ended – and so did the good times.

Although it seems likely that food commodities will continue to rise in price, even the wisest among us cannot see all ends. One thing that's different is that more of these investors are paying less with credit and more with cash. That leaves them less vulnerable. Nonetheless, a sudden nose-drive in the commodities market could change things very quickly.

The other factor in the equation is volatile energy prices. It takes fossil fuels to run a farm, and as things stand, most of those have to be imported from parts of the world that aren't particularly friendly to the USA. Again, anything could happen...

It's worth pointing out that the fellow who bought that plot of land in Iowa for 30% above its appraised value was getting back a bit of his own. According to the story in Bloomberg News, that land had been in his family originally, back around 1900 - it was a family legacy that enabled him to get it back.