Illinois Farmland Values Stable at Mid-Year

Posted on 09/04/2020 2:17 PM

A mid-year update finds Illinois farmland values remain basically steady versus the end of 2019, despite the economic disruption caused by COVID-19 and trade conflicts with China. The same update also finds only a slight decline expected in 2021 cash rents on professionally managed farms. This is the information coming from a webinar hosted today by the University of Illinois and the Illinois Society of Professional Farm Managers and Rural Appraisers.

The Webinar was an offshoot of the Mid-Year Snapshot Survey on land values typically conducted by the Society and released at the Farm Progress Show. Making the presentation were University of Illinois professors Gary Schnitkey, Ph.D., and Bruce Sherrick, Ph.D., and Luke Worrell, AFM, ALC, chair of the Society’s 2021 Land Values and Lease Trends Conference. Survey respondents were Society members along with others allied with the industry. It was conducted in late August.

In opening the webinar, Worrell noted there has been very little change in farmland prices across the state since January 1. While slight increases of as much as 3% were noted in the northeast and west central parts of the state, values across the rest of Illinois have remained static. The average price for excellent-quality farmland across the state was $10,313 an acre.

The same trend was true with good-quality land with some increases as much as 2.2% across the northern half of the state and decreases as low as 2.1% across the southern counties. The exception was the east central area which saw an increase of 4.5% since the first of the year. The average paid for good farmland was $8,233 per acre.

Across the state prices paid for average-quality land were very “stable,” with the overall average being $6,350 per acre.

The trend on who’s buying and selling has also remained very much along historic lines with estate and post-estate settlement accounting for 59% of the farmland being brought onto the market. The survey found farmers accounted for 17% of the sales in the first half of the year – a departure from previous years when farmers accounted for a much smaller percentage of sellers. “This may reflect some farmers selling land to bolster their financial sheets,” notes the speakers.

Other farmers are the primary purchasers buying 61% percent of the land that comes on the market. Local investors account for 17% of purchases. This means 78% of purchases as made by “local money.” Says Schnitkey.

Slight Decline in Cash Rents

In a comparison with neighboring states, it was noted that as of 2016, 50% of Illinois farmland is rented compared to 45% in Indiana, 41% in Iowa and 37% in Ohio.

Those responding to the survey indicate an expectation of a 2.5% decline in cash rents for professionally managed excellent farmland going into 2021. This drops the average rate from $305 per acre to $297. For good farmland the rate is projected to drop from $270 to $253. For average land the rate is expected to go from $224 per acre to $212, and $173 to $160 for fair-quality land.

The expectation is for the price of corn to be $3.25 per bushel on the 2021 crop. Projecting into the 2022 crop year the expected price for soybeans is $9.09 per bushel with $3.77 being paid for corn. The group expects low amounts of inflation looking two years out with only modest increase in interest rates.

Looking ahead to the end of this year, 58% of the respondents expect prices to remain stable; 28% look for values to ease less than 3% and 12% expects values to rise less than 3%. “The good news is no one sees prices falling off a cliff,” notes Schnitkey.

Looking five years into the future, 55% of those responding to the survey expect prices paid for farmland to be 1% to 10% percent higher. Basically, though, prices are expected to remain ‘stable.’ The same is true with cash rents with only 35% expecting rent rates will go up by as much as 10% over the next five years. Stable is again the word to describe the trends.

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