This analysis is provided by Luke Worrell AFM
We are in the midst of some unique times when it comes to Illinois agricultural real estate. “Unique” might be grossly underestimating the current landscape. Illinois experienced historically high prices in 2013-2014 that have been softening ever since. Annual dips in values have been anywhere from 2%-10% since that time.
A majority of land transactions in the state close in the October-March timeframe, so we are entering into “sales season.” Typically land values follow commodity prices and that market has been far from kind. I suspect we are all expecting to see a continued decline in land values; it will only be a matter of how significant a decline. In 2017, my precise area of Illinois logged declines of 2%-5% for “Class A” acreage. I suspect we will see a steeper decline for 2018 when it is all said and done.
The two main issues providing weakness to the corn and soybean market are:
- the ongoing trade disputes/tariffs
- the exceptional supply of grain we are producing
These two items are giving the corn and soybean markets plenty of reason to decline. The notion of “Supply and Demand” dictating the market still rings true - things are not favorable. The good news for growers in our area is that early yields have been extremely high. This should hopefully give a little reprieve since the value per bushel is under duress. Last year we seemed to end the year with momentum. I anticipate we will have a hard time replicating that finishing strength in 2018 because there is simply too much uncertainty.
There are a few bright spots in Illinois. The old adage “Location, Location, Location” has never been truer. High-quality, all-tillable tracts in strong competitive areas continue to obtain high sales prices. There are still parts of the state that seem to be holding on to value more than others. It will be interesting to see the market develop as we finish off another strong harvest while slogging through murky macro-economic conditions. Quite a few land transactions took place in September and October 2017. I predict it will take a little longer to get a strong feel for where we are this year. I don’t foresee a cliff, but rather a continued correction downward in a slow-developing market as we finish off 2018 and head into the 2019 growing season.