Double-digit gains of recent years likely over, say local experts
CHAMPAIGN — When combines retreat to the sheds next month and the busy season for farmland sales unofficially kicks off, some experts are forecasting Illinois farmland prices to remain stable through the selling season.
That means no more double-digit increases. Instead, more "normal" pricing trends are on the horizon.
"From talking to people, prices are fairly flat, and I would expect them to remain flat through this selling season," said Gary Schnitkey, a University of Illinois professor and farm management specialist in the Department of Agricultural and Consumer Economics. By flat, he means a range between prices increasing a couple percent to declining a couple percent.
That is a whole lot lower than where prices had been moving. Statewide farmland prices were on quite the roll; up 18 percent in 2011 and 17 percent in 2012, for example.
Schnitkey, who said price increases above 10 percent were not sustainable, expects a more normal, historical trend compared with what farmers had been seeing in recent years.
"During the summer, there were a handful of sales and some earlier in the year that continued to have some strong prices, but we weren't seeing the escalation that we had been seeing in the last couple years," said Ken Nofziger, president of Murray Wise Associates, an auction and real estate marketing company based in Champaign.
"The question on everyone's mind as we enter this season is, where are the valuations going to go?" he said.
Nofziger said two auctions on Nov. 7 in Champaign County — one in Ogden Township and another in Crittenden Township — could be the bellwethers as to where prices are headed for the coming season.
Reid Thompson, farm manager, broker and auctioneer with Hertz Farm Management in Monticello, also predicts "more historical growth rather than the exponential growth seen in recent years."
"With that said, I think good quality farmland will still sell at a premium," he said. However, with some uncertainty lingering about the market's fourth quarter and commodity prices, buyers will be more selective with what farmland they will buy, he said.
As for the other question out there with farmland prices — is there a bubble? Thompson said, "We're going to see a correction. How big, I don't know."
Farmland sales during the summer were quiet, which is typical, Nofziger said, but perhaps this summer they were even more so due to uncertainty about this year's crop because of the drought and commodity prices. The quiet summer followed a flurry of activity late last year that was attributed to concerns about tax rates.
Farmers still make up a majority of the buyers, he said.
Looking ahead to the fourth quarter and first quarter of 2014, Thompson said he believes the farmland market will see an increase in supply of farms coming up for sale.
"They primarily missed the boat, but (sellers) at least want to get very good prices," Thompson said.