After experiencing two years of soaring land values, with increases of 40% and 50%, the Illinois farmland market appears to be settling into a state of stability in 2023.
The Midyear Snapshot Land Values Survey, conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFMRA) in collaboration with an agricultural economist from the University of Illinois, offers a glimpse into this transition. The market seems to be taking a pause, as the report suggests.
In the first half of 2023, the values of Class A and Class B farmland have remained steady, showing minimal to no fluctuations in these prime land categories. In contrast, marginal Class C and Class D land values have experienced a slight decline of approximately 1% to 2%.
From a broader perspective, it appears that not much has shifted in terms of land values since the start of 2023.
Respondents to the survey have shared their expectations for the remainder of the year. Approximately 44% anticipate land prices to maintain their current levels, while 36% foresee a modest decline of 1% to 3%. While the farmland market is not undergoing a significant downturn, it is being observed closely, with market analysts monitoring developments in the latter half of the year. Around 53% of respondents expect land values to decrease over the next two years, while 38% foresee a period of stability.
The ISPFMRA survey encompasses several crucial aspects of the agricultural landscape:
Interest Rates: According to survey findings, about 63% of respondents expect interest rates to continue their upward trajectory, with increases ranging from 0.25 to over 1 percentage point. One-third of respondents foresee stable interest rates.
Sellers: Notably, two-thirds of farmland sales originate from settled estates.
Cash Rents: A significant portion of farm managers predict that cash rents for 2024 will remain unchanged from 2023 or experience a decrease. Forecasts indicate potential declines of $7 per acre for excellent farmland, $5 for good and average farmland, and $3 for fair-quality land. The average cash rent for average farmland in Illinois is reported at $300 per acre.
Lease Types: The survey reveals various lease types, with 27% involving share rent leases, 9% modified share rent leases, 25% cash rent leases, 32% variable cash rent leases, and 6% custom farming leases.
Energy Leases: A noteworthy trend involves the growing prevalence of energy leases. Roughly 34% of farm managers have entered into lease agreements with wind energy companies, while 31% have similar arrangements with solar energy companies. This trend is described as a gradual and steady increase.
The Illinois farmland market is undergoing a phase of stabilization, and while challenges persist, there is cautious optimism within the industry as it continues to evolve.
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Categories: Illinois, General