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Land Prices Holding Steady-to-Up – Survey Results

(Bloomington, IL March 21, 2024) Farmland values across Illinois were ‘steady-to-up”  last year while the number of sales throughout the state appear to have been down significantly from  2022, at least according to the 2024 Farmland Values Lease Trends Report released here today by the Illinois Society of Professional Farm Managers and Rural Appraisers. The comments came from Luke Worrell, AFM, ALC, chair of the Farmland Values Conference project sponsored by the Society.

Worrell, with Worrell Land Services, Jacksonville IL, says 2023 was a transition year for farmland values across the state. “For the first time in a long time, we saw quite a bit of variance across the regions,” he states, citing sales of Class A Excellent farmland:  “Regions 3 and 8 experienced continued sharp increases while Regions 1 and 6 decreased, something that hadn’t occurred in a few years. The Land Values Report is based upon sales transaction analyses done by members of the Illinois Society based upon publicly recorded sales activity. The information is based upon 10 geographic regions across the state. The data are compiled through the office of Bruce Sherrick, Ph.D., University of Illinois Department of Ag and Consumer Economics.

”The other big change from the last couple of years is the number of transactions,” he continues. “For much of 2021 and 2022, the land industry moved at a breakneck pace in auctions and private transactions. We were spoiled in a sense in that there seemed to be a Class A land auction on a weekly basis. That changed dramatically in 2023. The velocity of closed transactions slowed considerably. Values largely maintained themselves or slightly increased, but the number of sales happening throughout the state appear to have been down considerably from the prior year.”

In a synopsis of sales activity for 2023, Gary Schnitkey, Ph.D,, and Gerald Mashange, Ph.D., both with the University of Illinois Department of Ag and Consumer Economics, noted that estate sales represented the majority of farmland sales, accounting for 59 percent of them . These were followed by farmers making up 19 percent of sellers, of which 13 percent were retired and 6 percent were active. Institutions accounted for 9 percent of the sellers, and individuals represented 12 percent.

Median sales prices for 2023 paid per acre by land class were: Excellent — $16,779; Good — $12,911: Average — $9,198; Fair — $7,000; Recreational — $5,250, and; Transitional — $35,000. Quoting Worrell, “It’s all location, location and location.”

Price change averages (2023 vs 2022) by land class were: Excellent — + 5.5%; Good — + 7.0%; Average — + 13.3% ; Fair — +14.4%; Recreational — + 7.1%, and, Transitional —  + 22.0%.

Farmers are buyers

Farmers accounted for 59 percent of the buyers, with 57 percent being local farmers and 2 percent being relocating farmers. Individual investors who would not farm the land were the next largest group, accounting for 30 percent of the buyers. Local investors accounted for 17 percent of the buyers and non-local investors accounted for 13 percent. Institutions accounted for 6 percent of all buyers.

“Overall, survey respondents are expecting farmland values to remain stable in 2024, with the possibility of slight price declines. The primary factor behind this expectation is the anticipated decline in corn and soybean prices. Unfortunately, these price declines are not being offset by similar declines in costs,” Schnitkey writes. Respondents were asked whether they expected the agricultural economy to expand or contract. Of those surveyed, 93 percent expect the agricultural economy to contract modestly.

2024 Prospects

According to Schnitkey and Mashange, “Most respondents expect farmland prices to remain the same or decline in 2024, with only 4 percent expecting farmland prices to increase. In total, 32 percent of the respondents expect farmland prices to remain the same, while 64 percent expect prices to decline. Almost half (49 percent) of the respondents expect a decline of less than 5 percent, whereas 13 percent expect a decline between 5 and 10 percent. Only 2 percent of the respondents expect a decline of over 10 percent.

Rent Rates

For Excellent quality farmland, traditional crop shares in 2023 averaged an income of $350 per acre, cash rents averaged $350 per acre, and custom farming averaged $370 per acre. Custom farming resulted in the highest return among these arrangements.

Average cash rent levels decreased slightly from 2023 to 2024 for all land productivity classes. For Excellent productivity farmland, the $400 per acre cash rent for 2024 was $12 lower than the $412 per acre cash rent in 2023.

The complete 120-page Report is available for purchase at www.ispfmra. Copies of previous reports in pdf format are available there at no charge.

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