Soy Capital News

2018 Illinois Society of Professional Farm Managers and Rural Appraisers Mid-Year Survey Released

August 29, 2018

(Boone, IA, August 29, 2018) – Prices paid for Illinois farmland continued the “slightly lower” trend according to the Mid-Year Snapshot Survey completed by the Illinois Society of Farm Managers and Rural Appraisers. The survey results were released today at the 2018 Farm Progress Show held here this week.

In the first half of the year the value of Excellent quality farmland is down two percent and Average quality land is down one percent,” says David Klein, AFM, ALC, Soy Capital Ag Services, Bloomington, IL., and overall Chair of the Farmland Values program sponsored by the Society. “According to our member survey, prices being paid for Good and Fair quality land prices are very similar from the beginning of the year to June 30th.”

Picture of Soy Capital Ag for sale signKlein notes that the survey results indicated the state-wide average price for Excellent quality land by mid-year dropped roughly $200 per acre to $10,522 per acre from the beginning of 2018.  Survey results indicated prices for other land classes were estimated to be down less than $100 per acre respectively.

“Our survey somewhat confirms the survey from the Federal Reserve Bank of Chicago released earlier this month, which showed prices level to slightly higher in the first half of 2018, and is an indication of both the somewhat level nature of prices paid, and regional bias of each group’s respondents”, says Klein.  “Location and local ownership continues to be a major factor in the strength or weakness of many areas”.

This is happening when fewer acres are changing hands, and majority of respondents expect that to remain the case into the last half of 2018.   Farmers are still the major purchasers of land (65%), but their percentage has been giving way to investors as compared to past years.

Rising interest rates will continue to be a headwind to farmland prices according to respondents, with over 80% believing loan rates above 6% will negatively impact prices.  While the yield curve is flattening on interest rates, that will also force some short-term borrowers to readjust their thinking on borrowed money for farmland.

The survey was taken in July, after tariffs to US soybeans were implemented in China.  Nearly 60% of respondents believed that the tariffs were already impacting farmland values.  Eighty percent believed that if tariffs continued and the average soybean price stayed below $9/bushel, the farmland price declines could be as much as 10%, while 20% felt it could reduce land values more than 10%.

Klein added, “The positives we see happening include a strong general US Economy, which often leads to increased 1031 exchange activity, fairly tight supplies of land on the market, and other influencing factors include farmers adjusting to the economic environment, lowering production costs, slowing worldwide grain plantings, a slowly building inflation pressure and the broader investment community looking to farmland as a diversifier with all-time highs being recorded in the stock market.  Farmland is a unique asset class that is difficult to replicate and will always hold some value.  That safety is reassuring to many buyers and owners.”