Illinois farmland values continue upward spiral
Cash rents increased a great deal between 2011 and 2012, Schnitkey explains. “For excellent quality farmland, rents increased $60 per acre from $319 per acre in 2011 to $379 per acre in 2012. Increases were $60 per acre for good quality farmland, $50 per acre for average quality farmland, and $35 per acre for fair quality farmland.
Following are selected examples and overview…
1. Both Land Values and Lease Trends continue higher into 2012, and are expected to stay strong as long as crop income levels hold or increase.
2. Price and rent levels both increased steadily through 2011, and consistently among different productivity classes of land and regions of the state.
3. Land values maintain support from investment capital seeking alternatives to other financial assets. Among major issues are interest rates, U.S. and foreign sovereign debt, stock market performance, the dollar value relative to other currencies, and growth of consumer economies around the world.
4. Long leasehold interests, extended Conservation Reserve Program (CRP) contracts, deed restrictions, etc. that negatively impact ownership control penalize land prices.
5. As supplies of land tightened buyers were less concerned about one year leases, and receiving partial interests in current year crop or leases in progress, looking beyond a few months toward long term investment value.
6. The annually renewable USDA Farm Program appears to have very little effect on land values in 2011, eclipsed by other more dominant factors.
7. Current crop genetics increase yields while reducing year-to-year variability, which improves earning potential for lower classes of land.
8. Recreational tracts and transitional development land have been hardest hit because of struggling non-agricultural economies.
9. Some areas or counties carry name or reputation prestige, showing stronger prices than land with similar productivity and attributes in nearby areas or counties. However, undiscovered “pockets of prosperity” where land can be typically purchased at lower prices relative to its productivity are fewer and further between.
10. Regardless of the means of sale – public or sealed bid auction, broker listing, private transactions – excellent and good productivity tracts needed minimal marketing time, with a generally shorter period from exposure-to-market through sale to closing.
11. Not only are farmers the majority of buyers, but adjoining/nearby landowners and current tenants often lead the way.