Farmland Values, Cash Rents Remain Stable03/26/2018
Illinois farmland values continue to hold their ground around much of the state despite ongoing pressure from lower commodity prices and tighter farm margins.
The annual farmland values and lease trends report released by the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFMRA) shows average prices for different classes of land were flat to down 5 percent in 2017.
But the average productivity index of land sold in the state last year decreased about two points from the previous year, thus balancing out some of the average price declines, according to David Klein of Soy Capital Ag Services in Bloomington and chairman of the 23rd annual report.
“We’re calling things steady,” Klein said at the Land Values and Lease Trends Conference in Bloomington. “There isn’t much new regarding land values or changes in rent being paid for farmland.”
Excellent quality land prices around the state as of Dec. 31 averaged between $10,500 to $11,000 per acre in northern Illinois (down 1-2 percent), $10,350 to $11,125 in central Illinois (flat to down 5 percent) and $8,000 to $10,885 in southern Illinois (flat).
Some slight declines in land values continued a trend, though. Farmland values in Illinois generally decreased 15 to 21 percent since the peak in 2013.
“There was virtually no change (in values for excellent quality land last year in east central Illinois),” said Bruce Huber of ARA First Illinois Group. “But there was great variability.”
Huber noted there were two auctions for three tracts located six miles apart held on the same day in Douglas County last year. One sold for about $13,000 an acre, while the other fetched near $8,000.
A key difference between the two parcels was the high bid came from a landowner for an adjoining piece of farmland.
“There are local markets,” Klein said. “We’re seeing that throughout the state.”
Class A farms selling for $13,700 to $15,800 in Woodford County, $12,500 to $13,800 in Marshall County and $12,650 to $14,700 per acre still show market strength, according to the report.
“I think the biggest factor (for farmland values) right now, is who’s your neighbor,” Huber said.
Dale Kellermann of AFM First Illinois Group noted farmland values remain flat in southern Illinois. But premiums are still evident for flat/square parcels and large recreational tracts (300-plus acres).
Other factors, including location to population centers, barge facilities, new solar and wind energy projects and livestock facilities also help create “micro-markets,” Kellerman noted.
Overall, key drivers that held land prices up last year include unexpectedly high crop yields, low interest rates, a low inventory of land on the market (which was down 25 percent in northeast Illinois) and competition among farmers.
The majority of land sold in Illinois (62 percent) was purchased by farmers.
Cash rents also remained stable despite tightening farm margins. Average rental prices for excellent ground ranged from a low of $160 per acre in southern Illinois to $350 in central Illinois.
“Cash rents are starting to level out,” said Gary Schnitkey, University of Illinois farm management specialist.
An ISPFMRA survey “projects a very slight decrease in 2018,” he noted. “And, if (commodity) prices are where they’re at now, we’re looking at 2019 rents to roughly stay the same.”
For more information about the report, visit ispfmra.org.