STEELE - Rick Rohrich, a 26-year-old father of three, bought his first farmstead at a time when crop and pasture land was fetching record prices. He didn't think he had a choice.

Rural land prices are setting records and farmers, with a boost from high commodity prices, are in a buying mood.

"The prices keep jacking up and I don't see it slowing down," Rohrich said.

He closed on the 320-acre property last week, paying about $1,000 an acre for pasture land, a farmhouse and some outbuildings. The cost of the property was about double what it was worth less than five years ago, he said.

"Land prices are getting to where it will push us young guys out," he said.

Rohrich, who was born and raised in the central North Dakota town of Steele, said he's been farming nearly full-time since he was 16.

"My dad still farms - everything I got I got on my own," said Rohrich, who estimated he's about $500,000 in debt for the farm land and machinery. He's paying bills by raising cattle, and growing wheat, corn, sunflower, barley and oats on several hundred rented acres.

"I figured it was time to start buying into my own land - in this business you got to have it," Rohrich said. "I think it's a good investment, because they don't make land anymore."

Ray Brownfield, president of the Society of Professional Farm Managers and Rural Appraisers in Oswego, Ill., said rural real estate values around the country have soared to record prices, and they continue to rise.

"Farmers are back in the market - but the issue is supply and demand. There are many more buyers than there are sellers," Brownfield said. "I don't see a preponderance of ground coming on the market."

High commodity prices, while giving farmers a healthy bottom line, also have driven up the value of land - so much so that agriculture officials say the land itself has become the hottest commodity in North Dakota and other farm states.

In the past, so-called 1031 tax exchanges - named for the federal tax code section that allows them - led out-of-staters to buy land in North Dakota, but that practice has slowed with the most recent spike in farm land prices, experts say. The tax exchanges allow sellers to avoid paying capital gains taxes on land sales if they buy another property within a certain timeframe, appraisers and agriculture officials said.

Now, it's farmers selling to farmers, oftentimes to their neighbors.

"Since July, it been a farmer-driven market," said Steve Tomac, a real estate appraiser with Farm Credit Services in Mandan.

"Traditionally, farmers always have reinvested profits back into their land," Tomac said. And 2007 was a "magic year" that is spilling over into 2008, he said.

"Gross revenue in 2007 from production on land purchased in 2006 could have probably paid for that land," he said.

Farm real estate values nationwide rose 14 percent from Jan. 1, 2006, to Jan 1. 2007, to a record average of $2,160 an acre, according to the U.S. Department of Agriculture.

USDA spokesman Scott Shimmin said the report on 2007 farm real estate prices won't be finished until this summer, though it appears last year will set another record.

Low interest rates, government farm programs and reinvestments to avoid taxes on capital gains are among the factors contributing to the record farm land prices, but record commodity prices are the main reason, he said.

"Commodity prices have remained very strong, if not excellent - you would expect that to drive up real estate prices," Shimmin said. "If you look at the past 25 to 30 years, (farm land) has not been a very risky investment. Over the long term, it has had a pretty solid return."

Steve Tomac's father, retired Sioux County farmer Bob Tomac, said the situation reminds him of his first year farming 60 years ago, when he and others were able to pay for newly acquired land from profits reaped from crop production in the same year.

"We had a good flax crop in '48," Tomac said. "We got $5.65 a bushel - that was a lot of money in '48 when land at that time was $25 an acre at the most.

"That was quite a year, and I suppose it revived itself last year," Tomac said. "For farmers, it's been long overdue."

USDA said the value of North Dakota farm land rose to an average of $650 per acre at the end of 2006, up 13 percent from 2005.

Ken Knudson, a senior vice president at Farm Credit Services in Fargo, said some prime North Dakota farmland has increased more than 40 percent in the past year, but most has been in the 15 percent range.

A land sale in Walsh County, in northeastern North Dakota, recently fetched more than $4,300 an acre, likely a record for the state, he said.

"Every ridiculous land price the year before has become this year's bargain," Knudson said.

Vince Bitz, who owns an auction and real estate company in Bismarck, said the past few months have been the busiest time for farm auctions that he's seen in the nearly 30 years in business.

"Some of these ag prices are over the top," Bitz said.

"There are a lot of people sitting on the fence not knowing if they should sell or shouldn't sell," Bitz said. "Some are trying to figure out it's going to go higher - but there is no way of knowing. It's just speculation."

Andy Swenson, farm management specialist with the North Dakota State University Extension Service, said rural land prices in North Dakota have been increasing for several years but the current is level historic and unprecedented.

Swenson cashed in some of his own farmland recently, then wished he had held out.

"The first guy that called bought it in 45 minutes," Swenson said. "I probably left several thousand dollars on the table. I should have known better."

Rohrich, who will raise cattle on his newly purchased land, is hoping to buy some nearby property to expand his operation. But fertilizer and fuel have skyrocketed, and even twine for his hay bales has doubled in price over the past year, he said.

"I've learned it's a hard game and not one of these get-rich quick deals," he said.

Rohrich said most farmers in his county are at least twice - and some three times - his age. If he can stick it out, he may be able to expand his operation by purchasing their land someday.

"There are no young guys in the area," he said. "So I think more land will be out there in the future, but how high it will go, I have no idea."