We recently had the opportunity to attend the Illinois Land Values Conference in Bloomington where participants discussed the last 12 months of trends in farmland values and leases. Needless to say, with some of the sales that have been occurring lately, there was plenty to talk about! According to the research, good-quality Central Illinois farmland increased 22% since last year’s report. Keep in mind that that doesn’t include some of the more recent sales data that we have seen over the last 4-6 weeks. In some areas, there have been reports of sales being 25 – 35% higher than a year ago. In Southern Illinois, prices of good-quality farmland have risen by as much as 33% and in Northern Illinois as much as 18%.
What is driving the market right now? The conclusions reached at the Land Values Conference are similar to what we have seen: 1) Farmers will be able to sell their grain at a high price this fall and are penciling in strong profits. In our experience, farmers typically reinvest their profits back into their operation (i.e., buy more farm ground), as opposed to stocks, bonds, etc. 2) Interest rates remain relatively low and financing is readily available to farmland buyers who need it. 3) Investors, both individual and larger institutional buyers, view farmland as a stable investment that they can use to diversify their portfolios and receive a steady annual income off of.
So what is farmland worth in today’s market? It is a bit of a moving target, but the simple answer is, “More than it was a year ago”. In a recent DTN-Progressive Farmer article (Land Prices Soar in Seller’s Market), 1st Farm Credit Services appraiser Charles Knudson is quoted as saying he is appraising farmland at 4% monthly gains at the moment in his area. It is important to remember that the overall farmland market is still very much a group of localized smaller markets. A farm that sells for $10,000 per acre may only be a few miles from a farm that sells for $8,000 per acre…and both farms may have been sold for their maximum value. While location is one of the biggest factors in determining the value of a piece of property, it is not the only one. Do your homework on recent sales and see how they stack up to yours in terms of soil quality, drainage, fertility, access, eye-appeal, etc.
