Farmland values settle, grain prices at fault
The rate of increase in the value of Illinois farmland has flattened and lower grain prices are to blame, according to presentations made at the Illinois Land Values Conference held Thursday. Hosting the event was the Illinois Society of Professional Farm Managers and Rural Appraisers.
“Simply put, farmland earnings are important and have been the driver on prices paid for farmland over the past few years,” said Dale Aupperle, AFM, ARA, Heartland Ag Group, LLC, Forsyth, Ill., and overall chair of the annual Land Values and Lease Trends project managed by the society. “Sharply lower grain prices have diminished earnings projections and put the brakes on the uptrend in farmland values.”
Joining Aupperle in the presentation was Gary Schnitkey, Ph.D., University of Illinois College of Agriculture, Consumer and Environmental Sciences, Urbana, IL. He told the group that prices paid for corn are now near $4.30 per bushel. “Prices were consistently above $5.00 from 2010 through midsummer last year. Current expectations are for lower prices into 2014.”
He noted that crop insurance provided farmers with a substantial amount of cash in 2012 and 2013. “Those funds are no longer coming in,” he said. “Experts are forecasting farmland returns to drop by up to 20 percent.”
Aupperle explained that the trendline on farmland values has been upward for decades and has seen significant interruptions in the pattern three times.
He said there was a 50 percent correction in farmland values from 1980 through 1987, the period of the Farm Crisis. “This was after farmland rose nearly 500 percent from 1982. This one was a bubble.”
The next period was 1998 through 2001 when there was a 15 percent correction “after an 11-year uptrend from 1997 with values rising by 92 percent,” Aupperle said. “The last period was in 2008-2009. Values went sideways for a year after doubling in value from 2001.”
“Perhaps history gives us some guidance for our current thought processes,” he continued. “It doesn’t look like a bubble to us. A more normal time for farmland prices may be in store for the next several years. Commodity prices have led to this situation.”
In presenting their summary to the group, the two cited the 2014 Illinois Land Values and Lease Trends Report. This is a composite of reports from around the state on land sales and lease trends occurring in Illinois during 2013.
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