Farmland prices reverse course, drop in 2013
BLOOMINGTON — Illinois farmland prices declined last year after rising sharply the previous three years, a report from the Illinois Society of Professional Farm Managers and Rural Appraisers said.
Prices for land with excellent productivity dropped by an average of 2 percent in 2013, according to the society's annual survey, released Thursday.
Last year, the price paid for excellent land went up an average of 21 percent — the third consecutive year of double-digit percentage increases.
Prices for land with good, average and fair productivity fell by averages of 3 percent, 4 percent and 7 percent, respectively, during 2013, the survey said.
Big drops in corn and soybean prices led to the lower sums paid for farmland last year.
"Sharply lower grain prices have diminished earnings projections and put the brakes on the up-trend in farmland values," said Dale Aupperle, chair of the society's annual Land Values and Lease Trends project.
But unlike 1980 to 1987, when farmland values dropped by 50 percent after having risen by nearly 500 percent, Aupperle said the current situation "doesn't look like a bubble to us."
"A more normal time for farmland prices may be in store for the next several years," he said. "Commodity prices have led to this situation."
He said farmland prices also fell from 1998 to 2001 and from 2008 to 2009.
A survey of society members showed that 45 percent expect farmland prices to decrease by 1 percent to 5 percent this year, while 32 percent expect prices to decrease by 5 percent or more.
The remainder expected either stable prices or increases.
Statewide, farmland with excellent productivity sold for an average of $12,800 an acre at the end of 2013 — down from $13,100 an acre at the beginning of the year.
For the full year, the statewide average paid for land with excellent productivity was $12,600 an acre.
In Region 5 — which includes Champaign, Vermilion, Ford, Iroquois, Douglas, Coles and Edgar counties — the average price paid for land with excellent productivity was $11,500.
Within that region, land with good productivity sold for an average of $9,100, while land with fair productivity fetched an average of $4,400.
One notable sale in the region last year, the report said, was the sale of 960 acres in Douglas County, which fetched $14 million at auction — an average of $14,583 per acre.
Statewide in 2013, local farmers accounted for 64 percent of farmland buyers, though some nonfarm investors were among the purchasers.
Public auctions were the most popular means of sale, making up 43 percent of transactions. Other methods of selling included private arrangements (36 percent), sealed bid (11 percent) and multi-parcel auction (10 percent).
Gary Schnitkey, professor of agricultural and consumer economics at the University of Illinois, helped compile the report for the society. He said corn now sells for about $4.30 a bushel, in contrast to the last three years when prices often topped $5 a bushel.
Schnitkey added that crop insurance provided farmers with substantial cash in 2012 and 2013.
"Those funds are no longer coming in," he said. "Experts are forecasting farmland returns to drop by up to 20 percent."
Schnitkey said cash rents for farmland have fallen slightly and more declines could be in the offing if commodity prices are low this fall.
Ninety-two percent of respondents to the society's survey said they expect cash rents to drop at least $10 an acre if corn sells for $3.50 a bushel and soybeans sell for $10 a bushel.
Besides commodity prices, other factors affecting the price of farmland include interest rates, net farm income, the value of the dollar, alternative investments, demand for ethanol and long-term inflation, Aupperle said.
The results of the survey were released during the society's annual Land Values Conference in Bloomington.
CHANGE IN ILLINOIS FARMLAND PRICES
From Jan. 1, 2013, to Dec. 31, 2013
|Land quality||Jan. 1||Dec. 31||% change|
Source: Illinois Society of Professional Farm Managers and Rural Appraisers