If you want to follow up on something you heard at our annual land values conference, you can do that right here! Here are the slides from four presentations from our conference.
Here’s our program for the annual Farmland Values Conference on March 23.
7:00 a.m. Registration open
8:00 a.m. Greetings, Opening comments
8:10 a.m. Kevin Van Trump — Founder of Farm Direction and publisher of the weekly Van Trump Report Agriculture Risk in a world that feels Upside Down
9:10 a.m. David Oppedahl — Publisher of AgLetter, the quarterly newsletter from the Federal Reserve
Bank of Chicago
Projections of Federal Monetary Policy
10:10 a.m. Break
10:30 a.m. Dr. Bruce Sherrick, Director of TIAA-CREF Center for Farmland Research at the University of
Factors Affecting Farmland Markets
11:15 a.m. David Klein, Vice President and Agricultural Asset Manager, Soy Capital Ag Services
Dr. Gary Schnitkey, Farm Management Specialist, Department of Agriculture and Consumer
Economics, University of Illinois
2017 Land Values and Lease Trends Report
The 2017 Illinois Farmland Values and Lease Trends Report is coming — and you can make sure you get your copy as soon as they’re released. They’ll be available on March 23, and you can pre-order here. (You’ll be billed later when the reports ship.)
The cost is $20 (for 1-5 copies). This includes shipping. If you order 6 or more copies, you’ll pay $15 each (plus shipping).
You can also order by the case (36 copies) for only $10 each. Shipping is $20 per case. To order a case, simply enter a quantity of 36.
What IS happening with Illinois farmland values? Find out March 23 in Bloomington at the 2017 Illinois Land Values Conference. All attendees will receive a copy of the 2017 Illinois Land Values and Lease Trends Report.
CE Credit Note: Attendance at the full program qualifies for 4 hours of ASFMRA CE for Thursday, March 23, 2017 (Download our flyer for more details.)
Scheduled speakers include:
David Oppedahl — Publisher of AgLetter, the quarterly newsletter from the Federal Reserve Bank of Chicago Dr. Bruce Sherrick — Director of TIAA-CREF Center for Farmland Research at the University of Illinois
Kevin Van Trump — Founder of Farm Direction and publisher of the weekly Van Trump Report
David Klein, AFM, ALC — Vice President, Managing Broker, and Agricultural Asset Manager for Soy Capital Ag Services
Dr. Gary Schnitkey — Farm Management Specialist in the Department of Agricultural and Consumer Economics, University of Illinois
Registration is $70 for ASFMRA/RLI members and $85 for non-members.
We have set aside a block of sleeping rooms at the Doubletree. The nightly rate for the Land Values Conference is $120. Make reservations by calling the hotel directly at 309-664-6446. The room block is in the name of Illinois Society of Farm Managers. Lodging reservations must be made by February 28, 2017.
(Boone, IA, August 31, 2016) — Illinois farmland values continued their pullback around the state during the first half of 2016 as prices retraced between an estimated 3.3 percent and 7 percent. Continued low net returns and softening commodity prices are cited as the primary cause of the decrease. This is according to the Mid-Year “Snapshot Survey” information gathered by the Illinois Society of Professional Farm Managers and Rural Appraisers as well as the Illinois Farm and Land Chapter of the REALTORS® Land Institute (RLI). The data analysis is provided by Gary Schnitkey, Ph.D., with the University of Illinois College of ACES. The survey is part of an ongoing and larger annual Land Values and Lease Trends project conducted by the Society.
The survey results were released today at the Farm Progress Show being held in Boone, IA.
According to the survey, below $4 per bushel prices paid for corn are expected to continue into 2017 with some decreases in production costs expected. Cash rents paid are also expected to drop about $20 per acre.
Farmland Values and Volumes
Survey respondents indicated that land values decreased 3.3 percent for Excellent-quality farmland; decreased 4.5 percent for Good-quality land; 5.6 percent of Average-quality land; and dropped 7.0 percent for Fair- quality land.
(In a normal year, Excellent- quality farmland averages over 190 bushels of corn per acre, Good- quality farmland averages between 170 and 190 bushels per acre, Average- quality farmland averages between 150 and 170 bushels per acre, and Fair- quality farmland averages below 150 bushels per acre. )
Respondents estimated prices paid for Excellent-quality farmland during the first half of 2016 averaged $11,100 per acre; $9,400 for Good land; $7,600 for Average-quality land; and $5,800 for Fair-quality farmland. Sixty three percent of those responding to the survey reported that less farmland was sold during the year and 85 percent expect the same amount of land, or less, to be available for sale in 2017. Typical buyers (64 percent) continue to be other farmers and there are no expectations of significant changes in this.
Respondents indicate they are split on whether there will be the same or more demand for land with 48 percent expecting there will be some decreases in demand and 51 percent anticipating no change or a very slight increase.
Overall, respondents are more pessimistic about prices at midyear this year compared to recent surveys with a full 90 percent expecting some further decreases in values ranging from 1 percent to 10 percent. Corresponding decreases on per-acre-return are also forecast with 49 percent expecting a drop between $25 and $50 per acre and 16 percent predicting decreases of more than $50 per acre. A mere 2 percent expect returns to increase and then only very modestly.
While a full 93 percent expect corn yields to be above average they expect the price for corn to be around $3.45 per bushel. A full two-thirds of respondents expect a ‘slight’ decrease in production costs. All of this leads to expectations that cash rents will continue their decline along the lines of land productivity.
Currently the most popular type of lease arrangement is for Cash Rent (32 percent) followed by Share Rent (29 percent), Variable Cash Rent (20 percent), Modified Share Rent (12 percent) and Custom Farming (7 percent). Respondents indicate Share Rent leases and Fixed Cash Rents will decrease in use while Variable Cash Rents will become more popular.
The ISPFMRA will be conducting its annual Land Values and Lease Trends Survey over the upcoming winter months. The results of this larger survey will be released at the 2017 Illinois Land Values Conference set for March 23, 2017 at the DoubleTree by Hilton in Bloomington, IL.
We’ve made a digital copy of the 2016 Land Values Report available free! (Note that the PDF file is about 7 MB, so it may take some time to download.)
(Left-click the link to open the file or right-click to save it to your hard drive.)
Prices paid for Illinois farmland as well as rates being paid to rent the same ground have continued their downward trend for a second year according to a state-wide survey conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers. The results were released today at the annual Illinois Farmland Values Conference held here.
Download our Report Summary.
Prices paid for land rated Excellent and Good both dropped by eight percentage points during 2015 while Average land dropped 9 percent last year according to the study results. Be definition Excellent land typically yields over 190 bushels of corn per acre, Good land yields between 170 – 190 bushels and Average yields between 150 — 170 bushels per acre. The study is a result of a state-wide survey that was conducted in January among Illinois Society members and others within the industry.
In releasing the survey results it was noted that values regressed but remained ‘relatively strong’ for Excellent land and there are pockets of strength that still exist. The presentation was made by David Klein, AFM Soy Capital Ag Services, Bloomington, Il, overall co-chair of the annual Land Values Project which is conducted by ISPFMRA. His co-chair is Dale Aupperle, AFM, ARA, Heartland Ag Group, Forsyth, IL. Klein went on to explain that buyers are still willing to pay a premium for high quality soil. He noted that average prices paid for Excellent quality land in January 2015 were at $12,600 per acre. This compared to $11,600 at the end of the year.
“Buyers were cautious, looking for deals for land ranked as Good quality,” Klein continued. “We noticed there were some longer listing periods for some of this land during the year.” Opening year prices averaged $10,600 and closed out December at $9,700.
“Buyers of Average land were very selective,” Klein said. “There were more noticeable declines in prices for this type of land, which requires higher maintenance and management.” He also noted that there were more ‘No Sales’ at auctions for this type of land compared to the other classes. The statewide average for this type of soil was $6,215 per acre.
Lower Farm Income to Blame
In all cases, reduced commodity prices were blamed for the reductions in land prices as well as rent rates across the state. “All of agriculture is watching corn and soybean prices to see which direction our earnings will take in 2016,” Klein explained. He referred to the overall earnings outlook as ‘diminishing,’ and added that crop insurance is an important income safety net.
Aupperle also cited lower commodity prices for drop in Return on Investment (ROI). “Our traditional 3.5 percent to 4.0 percent ROI has been diminished as well. Those returns are now in the 2.5 percent range.” He added, however, that “investors still find this acceptable in an unstable general economy.”
Cash Rent Levels Will Continue Decline
An analysis of cash rent levels was done by Gary Schnitkey, Ph.D., University of Illinois Department of Ag and Consumer Economics. “Survey results indicate that income levels in 2015 from owning farmland were below 2014 levels, continuing a string of declining return years that began in 2013. Cash rents in 2016 decreased from 2015 levels and, if trends continue, we’ll see lower cash rents again in 2017. Respondents expect very little farmland to change hands because the current farm operator is unwilling to pay the desired cash rent. They also feel they could find other farm operators to replace current operators if the need arises.”
“For Excellent quality farmland, traditional crop shares had average income of $204 per acre, cash rent had $263 per acre, and custom farming had $259 per acre. Across all land qualities, returns from share rent leases were lower than cash rent leases. Custom farming had returns comparable to cash rents.
In those same categories, incomes in 2015 decreased from 2014 with net drops of $46 per acre of Excellent land for traditional crop share, negative $37 for cash rent and negative $58 for custom farming.
Projected rent rates for will vary from a high of $350 per acre to $275 per acre for Excellent land; $300 to $250 for Good land; $260 to $191 for Average land, and $208 – $150 for Fair land. In retrospect, mid-range rent rates for 2007 were $183 for Excellent land, $164 for Good land, and $144 for Average soil. Values peaked in 2013 at $396 for Excellent land, $339 for Good land, and $285 for Average land.
Looking to the future the survey respondents expect 2017 cash rents to be lower than in 2016. Forty one percent expect decreases of between $25 and $50 and 50 percent expect the decrease to range between $5 and $25 per acre. None are expecting rents to increase.
A Challenging Year
According to Klein, “2015 provided us a challenging year. Record harvests of our main crops the past two years led to downward pressure on prices. Farm income and farmland values are adjusting, but there are signs of optimism.
“Interest rates and farm debt-to-asset ratios remain historically low as farmers manage their balance sheets. Crop input costs continue to come down. Domestic beef, pork and poultry production are all projected to increase in 2016 – pork and poultry to record levels. Competition for land remains strong. With continued low interest rates and volatile equity markets, productive farmland continues to be a safe haven for both farmers and investors.”
• Sellers of Farmland – Estates accounted for 54 percent of the volume of Illinois farmland sold. Will there begin to be a higher percentage of other categories in 2016?
• Buyers of Farmland – Farmers accounted for 60 percent of the purchase made in 2015. Most were reinvesting into their farm business – where they know the value as well as anyone! When farmers stepped aside, investors were looking for opportunities in an uncertain financial market.
• Methods of Sale – Most farms were sold by private treaty in 2015, a sign more negotiating was occurring. Thirty-five percent of the transactions were at auction. In an uncertain market, auctions can bring decision-makers together in a hurry! As a result, some firecrackers continued to be let off and more “no sales” occurred at auction.
• Cash Rents – Generally speaking, our farm incomes were lower in 2015 and are projected to be even lower in 2016. This reduced crop share leases as compared to cash rents. Cash rents for 2015 declined by roughly $25 per acre to a $350 average on Excellent quality farmland. Most ISPFMRA members expect 2016 cash rents on Excellent quality soil farms to be another $25 per acre lower than the current year at $325 or less.
• Belt tightening can be heard throughout the countryside. Lower corn and soybean prices will reduce net farm income by over 20 percent in 2016. Spring crop insurance prices will be the lowest since 2006, and input costs today are nearly double what they were then.
• Livestock Industry – Beef, swine and poultry production numbers are all planned to grow in 2016, but livestock farmers have started to feel their own pinch of lower prices. These land buyers understand the value of “the farm next door” and continue to compete vigorously for additional farmland near their current facilities throughout the state.
• Auction Sales – Auction sales continue to show pockets of both strength and relative softness. Class A farms selling at Mt. Carroll for $14,400, Brimfield for $13,500, and Mendota for $12,000 early in 2016 show strength still exists in areas, but an increasing number of “No Sales” in November/December 2015 also shows that every farm auction isn’t bringing expectations every time. An auction takes two motivated buyers!
• Tract Sizes – Tract sizes were generally larger in 2015 than 2014. The largest tracts were often purchased at a premium by institutional or absentee investor landowners seeking to place significant holdings into farmland. Auctions on large tracts were met with mixed results.
• Transitional/Development Land – Fewer tracts of land were sold for development than in past years in downstate Illinois. More activity is picking up in the collar counties, which has led to a little 1031 exchange money again
• Institutional Money – Larger tracts of land have drawn interest again from institutional investors, pension funds and others. There may be a premium right now for bigger tracts.
• Drainage pays! – 2015 taught many landowners across the state the value of good drainage on our productive cropland. The ability to effectively move excess water and keep crops healthy resulted in wide productivity ranges and better returns on farms improved with tile drainage.
• 1031 Tax Free Exchange Influence – These continue to be used by landowners making even money trades to create larger tracts of land where they can be farmed more efficiently, as well as a slow increase in developmental exchange money out of the St. Louis, Chicago and Indianapolis markets.
• Farmland Availability – Farmland supply to the market remained fairly tight throughout 2015 until year end when the seasonal increase occurred in November and December. Most of our membership expects 2016 to see a larger supply come to the market this year.
Note to Media:
For more detailed, overall or region-by-region information, contact any of the following:
David Klein, AFM, ALC
Soy Capital Ag Services
Phone: (309) 665-0961
Dale Aupperle, AFM, ARA
Heartland Ag Group, Ltd.
Phone: (217) 876-7700
Gary Schnitkey, PhD
University of Illinois
Phone: (217) 244-9595
Douglas Deininger, ALC
Land Pro LLC
Phone: (815) 439 9245
1st Farm Credit Services
Phone: (815) 235-3171
1st Farm Credit Services
Rock Falls, IL
Phone: (815) 587-4988
Herbert Meyer, ARA
1st Farm Credit Services
Phone (309) 360-5553
Soy Capital Ag Services
Phone: (309) 665-0059
Mac Boyd, ARA
Farmers National Co.
Phone: (217) 268-4434
Bruce M. Huber, AFM, ARA
First Illinois Ag Group
Phone: (217) 521-3537
Thomas L. Toohill, AFM
Soy Capital Ag Services
Phone: (217) 547-2885
Dale Kellermann, AFM
First Illinois Ag Group
Phone (618) 622-9490
David M. Ragan
Farm Credit Illinois
1506 E. Fayette Avenue
Phone: (217) 857-6450
Southern Illinois University
Prices being paid for farmland across Illinois are continuing a softening trend that is following prices being paid for commodities with decreases of between 2 and 7 percent depending on the quality of farmland and location. This is according to the midsummer “Snapshot Survey” done by the Illinois Society of Professional Farm Managers and Rural Appraisers that was released today at the Farm Progress Show being held here.
“Land values are continuing a general softening across the state with the exception of some regional areas where there has been very little land for sale,” says David Klein, AFM, ALC, vice president of Soy Capital Ag Services. Bloomington, IL and co-chair of the annual ISPFMRA Land Values Survey and Conference. “Decreases in farmland returns for 2015 and 2016 are seen as the main reason for the lower values,” Klein explains. “USDA projected income for 2015 is expected to be the lowest since 2010 and our survey respondents are telling us they expect the softness in land values to continue.” It is expected that the price paid for a bushel of corn will be below $4 into 2016.
The “Snapshot Survey” is done annually by Gary Schnitkey, Ph.D., University of Illinois College of ACES in conjunction with ISPFMRA. This information supplements the Society’s larger efforts at year-end to document farmland prices and cash rents across Illinois and is part of the Society’s Land Values Conference held each March.
According to the survey, one year ago respondents said Excellent quality farmland was averaging $13,000 per acre. “This year the reported average is $12,200 per acre which indicates a drop in values of 6.5 percent,” Klein says. Good quality farmland decreased just under 6 percent from a year ago and Average quality land was down nearly 8 percent. In a normal year Excellent quality farmland averages over 190 bushels of corn per acre, Good quality farmland averages between 170 and 190 bushels per acre, and Average quality farmland averages between 150 and 170 bushels per acre.
“A low supply of farmland for sale during the first half of 2015 may be helping prop up values,” Klein asserts. “Survey participants were divided on expectations for the supply of farmland coming to the market in the second half of 2015 with 45 percent expecting the same, 27 percent expecting more and 27 percent expecting less farmland for sale.”
He notes that farmers continue to be the primary buyers of farmland but 72 percent of respondents said they are seeing the same or higher investor demand for farmland during this pullback as investors look for opportunities where they may have been out-bid by operating farmers the past few years for farmland at higher prices.
He adds that while 95 percent believe that interest rates will stay the same or increase less than 1 per cent between now and year-end due to the condition of the general economy, interest rates still remain an important concern to this group regarding their outlook on farmland prices.
“They are also highly concerned with commodity price decreases from reduced global demand and how this will affect farmland values,” Klein says. “They look at the potential for increased pesticide and seed costs as new technologies are released to battle weed resistance issues, while they expect fertilizer costs to retrace slightly.”
“We continue the settling pullback of farmland values in a period where fluctuations in all financial markets and currencies are moving rapidly. Illinois farmland continues to provide the long-standing unique hard-asset stability that makes it distinctive to other investments. We also continue to be optimistic that because Illinois farmland is among the most productive in the world, and our farmers some of the most efficient at responding to market forces and management practices, that Illinois farmland will continue to be a historically competitive investment well into the future.”
Cash Rents Also Dropping
“Cash rents in 2016 are expected to be about $30 per acre lower than 2015 cash rents” Schnitkey reports. He cites 2016 rents for Excellent farmland to be in the range of $316 compared to current values of $350; $267 in 2016 for Good land compared with $295 for this year; $219 next year for Average land compared with $250 in 2015, and; $177 for Fair land in 2016 compared with this year’s $200 rent per acre.
Now you can order the 2016 Illinois Farmland Values and Lease Trends Report! Fill out the form below and we’ll email you an invoice. (The report becomes available on March 17.)