While the rise in farmland values continues, it is doing so at a slower pace and locals buyers are replacing 1031 "Exchange" buyers according the annual Mid-Year Land Values Survey sponsored by the Illinois Society of Professional Farm Managers and Rural Appraisers. The survey was done in conjunction with the University of Illinois and was released today at the 2007 Farm Progress Show held here.

According to Andy Brorsen, ARA, president of the Illinois Society, the survey results are a compilation of information gleaned from the organization's members in August. "Our Mid-Year Survey is an insight into farmland value and lease trends during the first six months of 2007. We survey our members to gain their expert insight into the farmland market." Brorsen said this is the third year the mid-year survey has been conducted.

The key points raised by the survey include:

1. Illinois farmland values increased by 5.9 percent during the first half of 2007. Society members indicated that farmland values in July 2007 were 5.9 percent higher than January 2007. All land classes and all regions of Illinois saw roughly the same increases. In northern Illinois, land prices averaged $9,900 for excellent quality farmland. In central Illinois, land prices averaged over $5,000 for excellent quality farmland, with some Society members reporting averages over $6,000 per acre.

2. Society members expect large land price increases in 2007. Farmland price increases are expected to be over 10 percent by a third of members, between 5 percent and 9 percent by 42 percent of members reporting, and between 0 and 4 percent by 20 percent of the members. This will be the fourth straight year in which land price increases are large. Since 2004, average land prices in Illinois have increased by over 50 percent.

3. Of the parcels sold, Society members indicated that 36 percent involved 1031 exchange funds. This is down dramatically from the 2005 mid-year survey when Society members indicated that 56 percent of transactions involved 1031 exchange funds. Thirty-nine percent of Society members indicated that use of 1031 exchanges has decreased in 2007.

4. Interest among farmers has increased. Seventy-seven percent of Society members indicated that farmers and local investors have become more interested in purchasing farmland. In 2006, results from the mid-year survey indicated that farmland prices had reached a plateau. Development around Chicago and other urban areas had slowed, causing some concerns that Illinois farmland values could have reached their peak. However, higher commodity prices caused by new bio-fuel demands have lead to renewed interest in farmland among farmers in the last half of 2006. This has lead to renewed growth in farmland prices.

5. Volume of farmland sold decreased during the first half of 2007. Twenty-two percent of Society members indicated that the amount of farmland being sold decreased during the first half of 2007, while 19 percent indicated that it stayed the same and 14 percent stated that volume increases. Society members expect the volume of farmland sold to stay the same during the second half of this year.

6. Society members expect cash rents to increase by an average of $21 per acre for the 2008 cropping year on professionally managed farmland. Society members indicated that cash rents averaged $191 per acre in 2007. The expected 2008 cash rent is $212, and increases of $21 per acre over 2007 levels. In 2006, cash rents were $169 per acre. Expected 2007 cash rents are expected to be $43 over 2006 levels.

7. Society members expected use of cash rents and flexible cash rents to increase. A full 80 percent of Society members expect use of share rent leases to decrease in 2008. The majority (69 percent) are expecting an increase in cash rent leases and flexible cash rent leases (62% of Society members). These results may signal a new trend towards more use of flexible cash rent leases.

Members of the Illinois Society are professionals in farm management, rural appraisal, and agricultural consulting in the state. Many of the members are also licensed real estate professionals who are actively engaged in real estate brokerage.