Survey: Farmland prices down first half of year
URBANA — Typical prices paid for farmland were down 2 percent to 4.1 percent during the first half of this year, according to a mid-year survey by the Illinois Society of Professional Farm Managers and Rural Appraisers.
That continues a trend that began last year, when the survey showed farmland price increases slowing markedly from the double-digit percentage increases of previous years.
Sharply lower prices for corn and soybeans were cited as one of the biggest factors in the drop in farmland prices.
"Couple that with an expectation of interest rates to possibly rise over the next year, higher input costs and the potential for very high costs for propane this winter, and there has been a dampening in attitude," said Dale Aupperle, the chair of the society's annual Illinois Land Values and Lease Trends Report.
The survey of members, released today, showed that as of July 1, the average price paid for excellent-quality farmland — land that averages more than 190 bushels of corn per acre — was $13,000 an acre, down from $13,200 an acre a year earlier.
Here's how other land types fared:
— Good-quality land (yielding 170 to 190 bushels an acre) averaged $10,700 an acre.
— Average-quality land (yielding 150 and 170 bushels an acre) sold for $8,600 an acre.
— Fair-quality land (yielding less than 150 bushels an acre) averaged $6,700 an acre.
Generally, the lower the quality of land, the larger the percentage drop in price, the survey found.
Fifty-five percent of survey respondents said they expect land prices to decrease between 1 percent and 5 percent over the next year, while 29 percent said they look for a drop of 6 percent to 10 percent.
But most respondents said they don't look for a price decline greater than 10 percent over the next five years. Forty percent flatly said it won't happen, and another 48 percent said there's less than a 10 percent chance of it happening.
The mid-year survey is conducted for the society by University of Illinois agricultural economist Gary Schnitkey.
"This softening in prices has been expected for some time, and this is not a doom-and-gloom scenario," Aupperle said. "Land prices are still in ranges that have never been seen before, and mindful land owners and operators can still be profitable with the correct management programs in place."
When respondents were asked what would happen to farmland prices if corn prices averaged between $2.50 and $3 a bushel, 55 percent said farmland prices would decrease by more than 10 percent, while 36 percent said prices would drop between 5 and 10 percent.
Most respondents said cash rents paid for farmland will drop, with an average expected decrease of $33 per acre. Excellent-quality farmland had a average cash rent of $374 per acre in 2014, and that is expected to drop to $338 per acre in 2015.