Earlier today I attended the 2012 Illinois Farmland Values Conference in Bloomington, IL. This annual conference is presented with the intent of summarizing what took place in the previous 12 months in farmland real estate and predicts trends for the next year. Needless to say, with the amount of activity we have seen in farm sales this last year, there was a lot to discuss.
Before the main presentation, we also listened to a couple of other interesting speakers. Nick Paulson, an associate professor in the College of ACES at the University of Illinois, spoke about what kinds of changes we can possibly expect in the upcoming Farm Bill. The overriding theme is that change is on the horizon. According to Professor Paulson, more than likely direct payments will be eliminated in an effort by the government to shed 4.9 Billion in annual payments. The main goal appears to be to shift the Farm Bill’s perception as a price support system and more towards a risk management system. The second speaker, Adrian Fay of Midwest Agribusiness Innovation Network, spoke of the global Ag economy. While Adrian touched on many great points, one of the key ones he discussed is that while we can make all the predictions we want about the next 30+ years, there are no guarantees. By “no guarantees” he is referring to the global population growth and how many are predicting the profits of the Ag sector to continue their solid growth as farmers try to keep up with what appears to be a growing worldwide demand. Adrian pointed out that it is important to remember that economies can change, other countries can emerge as food producers, and there is always the possibility that at some point the prices will be so high for commodity prices, countries will not be able to afford them.
The main topic for the day, however, was the farmland value trends portion. As I mentioned above, and as you already know if you follow the farmland market at all, we saw a dramatic rise in prices in 2011. A few statistics that were pointed out:
-Excellent (Class A) farms in Central IL saw a 30 – 35% jump in land prices and a 15% increase in cash rents in 2011. Good (Class B) farmland in Central IL saw a 20% – 25% increase in land values and a 15% rise in cash rents in the same time period. This area saw prices reach as high as $13,000+ per acre in 2011.
-Excellent & Good farms in Northern IL both experienced a 10 – 25% increase in land prices and a 7 – 25% increase in cash rents. Prices reached as high as $10,000+ per acre in this region
-In Southern IL, which is made up primarily of Good and Fair (Class C) soils, prices increased by 13 – 35% and cash rents rose by 13 – 25%. Prices in this region topped out in the $8,000+ range for farmland
-For those farm managers and appraisers that were polled, most expect that we will see the market hold steady to a slight (up to 5%) increase in 2012
-From 2007 to 2012, the average cash rent on Excellent IL farms increased from $183 – $379
-Cash rent on Good farm increased from $164 – $331 in the same tim period
-From 2010 – 2012, farmland auctions increased from 37% to 44% as a sale method
-Every county in IL experienced at least one record-breaking sale price in 2011.
So what does all this mean? We can all speculate what will happen in 2012, but as with every year, much of what happens in the farmland market will be dependent on what happens with corn and soybean prices. With many farmers already in the field, it should make for an interesting summer.
