By Charlie Schlenker
The price of farmland in Illinois has soared in recent decades. That is changing.
“The feel of the market is noticeably different than the euphoria of 2021 and 2022. This has led to some cautiousness and patience from sellers and buyers alike,” said the 2024 Illinois Land Values and Lease Trends Report from the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFMRA).
As of last year, the average price of high-quality agricultural land in the region that includes McLean, Livingston, Tazewell, and Woodford counties had grown more than four-fold over two decades. It was still rapidly accelerating as late as 2021 and 2022.
The average price for the region was more than $16,000 per acre for high quality land. Ten years ago, it was $12,000 for the region; 20 years ago, it was just under $4,000 for the region.
High prices continued last year with a couple of sales in Tazewell County that approached a whopping $23,000 an acre and one in McLean County came in at $20,000 per acre.
Statewide averages over each period were marginally higher than for the region. Overall land values were still up across the state last year, but the report showed some declines in the price of high-quality farmland in northeastern Illinois and the region around Decatur. That variability hadn’t happened in some years, said the society.
Ag bankers and farm auctioneers have seen prices plateau in the first six months of this year in their business.
“We try to keep track of the arms-length transactions, public sales mainly in the northern two-thirds of the state of Illinois, which is our major footprint area, basically north of Interstate 70. The market has shown us land prices are down about 3%,” said Dave Klein, managing broker of the management and farm real estate firm First Mid Ag Services.
Current conditions
But the price of commodities has now dipped substantially.
“Two years ago, corn was over $7 a bushel or right around there, and now it’s not quite half of what it was. Cash flows are tight. Farmers were making really good money two years ago and now in some cases it’s a struggle to break even,” said Birlingmair.
Meanwhile, fertilizer and other input costs have gone up a lot. And greater global competition may keep corn and bean prices down for a while. Birlingmair said there is a lot of supply and not as much demand.
“South America continues to expand their ag operations. They continue to clear off acres in the rain forest. In Brazil the government just agreed to spend an extra $71 billion on infrastructure. Since 2018 the amount of soybeans grown in south America has doubled,” said Birlingmair.
High interest rates can cut both ways in affecting farmland prices. Higher rates and low operating income may make it less possible for farmers to expand their holdings. Yet, the high rates might also make some owners more willing to sell.
“We could see more land coming to the market this fall. There are some folks that maybe are even leveraged a little bit that might say I’d be willing to sell a piece or two if I could rent it back, if you could find me a landowner. That would reduce my debt load and improve my balance sheet and give me a little more working capital,” said Klein.
Working capital is more important than usual just now because interest rates are up not only for land purchases but for the operating notes that allow farmers to buy seed and fertilizer. Debt service to put in a crop is a lot more than it was three or four years ago, said Klein. He cautioned this is not a major market force. It’s affecting mainly the farmers who have bought land in the last five years, he said.
“While the spigot hasn’t shut off, the speed at which sales are happening is slowing,” said the ISPFMRA report. “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.”
Birlingmair said the situation is kind of like a wedding reception. Sometimes you have a full house. Other times, people haven’t RSVP'd and you’re left nervously hoping they show up because there is all this food on the table.
“There’s just a lot less hands in the air at an auction than there were three or four years ago, even two years ago,” said Birlingmair.
That’s not to say there are no buyers.
“It just depends on who the neighbors are when you have a sale. If somebody has driven past that farm for 50 years or 60 years or they own the piece next to it and they’re going to have one chance in their lifetime to buy it, they’ll make a really strong effort to buy it,” said Birlingmair.
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