Illinois farmland prices continue to march upward, but not at as steep a slope as in 2021, according to the latest land value report released March 23.
“Every (land) class saw significant increases,” said Luke Worrell, overall chair for the 2023 Illinois Farmland Values and Lease Trends report.
In 2022, Class A Excellent acreage saw an increase of 16% compared to 26% the year before.
Last year in his introduction to the Illinois Society of Professional Farm Managers and Rural Appraisers report, Worrell used words like “unprecedented” and “meteoric rise” in describing the increases. This year he used fewer superlatives but emphasized the significant farmland increase over the last two years.
“If you factor in 2021 results, Class A land across Illinois saw an increase of over 45% during a 24-month time span,” said Worrell of Worrell Land Services, Jacksonville, Illinois.
While premium acreage always carries the flag, lesser-quality acreage also saw increases higher than 25% over the same period, he said.
So far in 2023, sales are still up, volumes aren’t as high and farmland prices seem to be leveling off, he said in Bloomington at the 28th annual land values report release.
The report, which is compiled with the help of 70 land professionals and members of the society, showed a “tremendous amount of transactions” in 2022. Transactions were up 17% last year, continuing a trend of an “enormous amount of sales over the last two years,” he said.
“Mixed use and recreational properties have seen a strong increase as well, with this year’s study showing an increase of 14% in 2022 alone,” Worrell said.
Central, west central and western regions showed 20% increases in recreational land sales. That shows it’s not just the high-productivity and well-tiled land increasing in value, he said.
Several factors led to the increased prices last year. Reduced transactions in 2020, historically low interest rates, strong demand, increased commodity markets and overall fear in other economic sectors all played a role in the groundswell.
“In many parts of Illinois, we saw a huge number of transactions throughout the first few months of 2022,” he said. “We still have a really strong market, but it is a real different market,” he said of sales so far in 2023.
He attributes part of the change to rising interest rates and inflation.
“Interest rates have literally more than doubled since last year and that is bound to have an effect,” Worrell said.
Interest rates last year at this time were 3.5%, and now they are 8%.
“The early months of 2023 have provided more erratic sales than what we have become accustomed to,” he said. “A leveling off — perhaps a pause — is expected.”
Even with that volatility, Worrell says managers do not expect a drastic change.
“We do not anticipate the market to plummet downward. In fact, 70% of survey respondents foresee either a level market or a slight decrease. Only 1% of respondents expect a decrease greater than 10%,” he said.
As for cash rents, University of Illinois ag economist Gary Schnitkey said average cash rent levels increased substantially from 2022 to 2023 for all land productivity classes, with the higher-quality land experiencing the greatest absolute increase.
For Excellent productivity farmland, the $412 per acre cash rent for 2023 was $43 higher than the $369 per acre cash rent in 2022. Cash rents for Good quality land increased by $31 per acre from $322 in 2022 to $353 per acre in 2023, said Schnitkey.
Overall, no farm managers said they expected 2024 cash rents to increase over 2023.
An equal portion of 36% said they expect 2024 cash rents to be the same as in 2023 or to decrease from 2023 levels, said Schnitkey, who was awarded the society’s highest service honor at the meeting.
The ag economics professor and regular contributor to farmdoc daily said 2022 was an exceptional income year for farmers.
Most farmer managers expect grain prices to stabilize and be “less go-go” this year after record-setting incomes last year, he said.
Of farm managers surveyed, more than half (52%) said they expect corn prices to be in the $5 to $6 range this year.
“They don’t see a cliff-fall in prices,” Schnitkey said, and they also don’t see the cost of production going down.
A big change going forward is that no more government pandemic payouts are expected, he said.
Guest speaker David Kohl, professor emeritus at the College of Agricultural & Life Sciences at Virginia Tech, agreed that going forward farmers can expect fewer government payouts.
Source: agupdate.com
Categories: Illinois, Rural Lifestyle