Here are four key drivers of cropland values to focus on as the prime land-sales season approaches:

Crop prices: Expectations for continued tight grain stocks have helped boost corn prices from about $3.50/bu. last year, to around $6.85/bu. today. That represents $570/acre in additional revenue on land producing 170 bu./acre corn, and is a primary driver of rising land prices.

Much of the bullish investment thesis for farmland depends on sustained growing demand for grain and animal protein from fast-growing nations like China and India. But that view could be upended: The economies of China and India are slowing. China expert Nicholas Lardy of the Peterson Institute for International Economics say there are questions over how long China can sustain its growth over the medium term.

Even if high grain prices persist, don’t expect crop earnings to leap again in 2012. Seed, fertilizer and other input suppliers have proved adept at raising prices to extract their share of growers’ margins. Farmers are also expected to aggressively bid up cash rents to expand their operations (See Rent sidebar.).

Interest rates: The era of historic low rates was expected to taper off when the Federal Reserve stopped buying Treasuries at the end of June. But the Fed has subsequently pledged to keep interest rates down at least through mid-2013 to help bolster the economy. The interest rate on 10-year Treasury bonds – a benchmark indicator for mortgage rates – recently fell below 2%, a level last seen in April 1950.

In the Fed’s latest bid to revive the sputtering recovery, the agency is considering “twisting” its portfolio of Treasury securities to hold more long-dated government debt. This could further lower mortgage rates and fuel land-price inflation since lower borrowing costs expand both the pool of qualified potential buyers and the price they can afford to pay for land. Longer term, interest rates will inevitably rise. Rising rates will prompt land buyers to demand higher income yields – which translates to lower land values.

Land inventory: Until earlier this year, a lack of attractive alternative investments (one-year CDs are paying 0.85%; taxable money market funds 0.02%) prompted landowners to put off land sales that would normally have occurred as part of estate settlements and farmer retirements.

 But record land prices are attracting increased farm listings and auctions. Hertz Farm Management, a Nevada, IA, farm-property manager and brokerage, says its volume of farm sales is running 17% ahead of last year. “For a long time, the reason the market had been so strong is that there was a limited amount of land for sale,’’ says Troy Louwagie, a Hertz broker in Mount Vernon, “but that changed in midsummer.” Mr. Louwagie says he is seeing more land come on the market this fall than at any time in his 15-year career. As the supply of land for sale expands, buyers will have more choices and that could have a negative impact on land values.

In Illinois, market participants so far see only a normal seasonal rise in property offerings. Listings are generally selling within 30 days, provided they are priced at the current market, which is $10,000-11,000/acre in central Illinois, says Dale Aupperle, president of Heartland Ag Group, Ltd., Forsyth, IL.