(Champaign, IL – September 4, 2020) – Stability is the key word on what’s happening with farmland values and interest rates with only a slight decline expected in 2021 cash rents. This is the information coming from a webinar hosted today by the University of Illinois and the Illinois Society of Professional Farm Managers and Rural Appraisers.
The Webinar, Expectations for 2020 Farmland Prices and 2021 Cash Rents, was a offshoot of the Mid-Year Snapshot Survey on land values typically done by the Society and released at the Farm Progress Show. Making the presentation were University of Illinois professors Gary Schnitkey, Ph.D., and Bruce Sherrick, Ph.D., and Luke Worrell, AFM, ALC, chair of the Society’s 2021 Land Values and Lease Trends Conference. Survey respondents were Society members along with others allied to the industry. It was conducted in late August.
In opening the webinar, Worrell noted here has been very little change in farmland prices across the state since January 1 While slight increases of as much as 3 percent were noted in the northeast and west central parts of the state, values across the rest of Illinois have remained static. The average price for Excellent Quality farmland across the state was $10,313.
The same trend was true with Good Quality land with some increases as much as 2.2 percent across the northern half of the state and decreases as low as 2.1 percent across the southern counties. The exception was the east central area which saw an increase of 4.5 percent since the first of the year. The average paid for Good farmland was $8,233.
Across the state prices paid for Average Quality land was very “stable,” with the overall average being $6,350 per acre.
The trend on who’s buying and selling has also remained very much along historic lines with estate and post-estate settlement accounting for 59 percent of the farmland being brought onto the market while Other Farmers are the primary purchasers buying 61 percent of the land that comes on the market.
The stability aspect also comes into play with expectations for interest rates and for farmland prices for the balance of the year.
Slight Decline in Cash Rents
In a comparison with neighboring states, it was noted that as of 2016, 50 percent of Illinois farmland is rented compared to 45 percent in Indiana, 41 percent in Iowa, and 37 percent in Ohio.
Those responding to the survey indicated an expectation of a 2.5 percent decline in cash rents for professionally managed Excellent farmland going into 2021. This drops the average rate from $305 per acre to $297. For Good farmland the rate is projected to drop from $270 to $253. For Average land the rate is expected to go from $224 per acre to $212, and $173 to $160 for Fair quality land.
The expectation is for the price of corn to be $3.25 per bushel on the 2021 crop. Projecting into the 2022 crop year the expected price for soybeans is $9.09 per bushel with $3.77 being paid for corn. The group expects low amounts of inflation looking 2 years out with only modest increase in interest rates.
Looking 5 years into the future, 55 percent of those responding to the survey expect prices paid for farmland to be 1 to 10 percent higher. Basically, though, prices are expected to remain ‘stable.’ The same is true with cash rents with only 35 percent expecting rent rates will go up by as much as 10 percent over the next 5 year. Stable is again the word to describe the trends.