Last week we conducted an auction of 81 acres in Vermilion County, IL, about half way between Champaign and Danville. There was nothing magical about the property – 90% tillable with good (but not great) soils, and an acre carved out for a cell phone tower. Local farmers were the most active bidders and the hammer dropped at $615,000 or $8,471 per tillable acre. This price was obviously a long way from some of the $12,000 per acre sales we’ve been hearing throughout the Midwest, but most of these high sales are in strong areas, from both a soil type perspective and a “farmer wealth” perspective.
Sale price aside, we were able to talk to several lenders and land buyers during the marketing of our auction and found several of their comments quite telling, including:
Lender 1 – “You would be surprised to learn how many farmers have over $500,000 in the bank, just waiting for a farm to come for sale in their area.”
Lender 2 – “Farmers came in this spring to set up their operating lines of credit this spring, just like normal. The surprise is how many that have not borrowed any money thus far and it’s already the end of June!”
Broker 1 – “There are going to be a lot more tracts coming on the market in the near future. Landowners are hearing about these high prices and are ready to take advantage of them.”
These comments confirm a couple of things that I have been thinking for some time – A. Farmers are going to continue to be quite aggressive land buyers. They have cash in the bank and the crop prospects for 2011 look quite good at the present; and B. There will likely be more tracts for sale this fall. Some of this new supply may be investors taking profits, but a lot may be heirs and beneficiaries deciding that the time to take the money and run is now here. As an offshoot of this thought – I also anticipate more “no-sales” this fall, not because the price isn’t in line with the market, but more because expectations are too high. As we saw in Vermilion County, not all farms are worth $12,000 per acre.
