Prices still on the rise
Between 2011 and 2012, there’s been a shift away from share rental arrangements and toward more cash rent deals and land purchases.
The midpoint for Illinois cash rents for excellent-quality farmland moved from $319 per acre in 2011 to $396 per acre in 2013. That’s a 24% increase, says Gary Schnitkey, University of Illinois farmland expert. While cash rents are up, so is the overall value of farmland.
This is the third year Illinois has had double-digit increases in excellent-quality farmland, Schnitkey says.
In 2012, excellent quality farmland increased by 21%, moving from an average of $10,510 to $12,670. Additionally, good and fair quality farmland increased 17% and 16%, respectively. Even poor-quality farmland increased 17% to $6,980.
According to the 2013 Illinois Farmland Values & Lease Trends report, cash rents for 2014 are expected to remain flat.
Recent surveys conducted by the Tenth Federal Reserve District and the Seventh Federal Reserve District also showed double-digit increases in farmland values. These across-the-board increases are a reflection of the strength of the farm economy, says Marc Schober of Farmland Forecast.
The survey of the Tenth District found that the value of non-irrigated acres increased 18%, while irrigated acres rose 25%. Ranchland values also jumped by 14%. The Tenth District includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the western third of Missouri and the northern half of New Mexico.
In the Seventh Federal Reserve District, "good" farmland values increased 17% year-over-year. The Seventh District includes the entire state of Iowa and portions of Illinois, Indiana, Wisconsin and Michigan.
Four of the five states within the Seventh District posted double-digit annual increases with Indiana leading the way with a 21% increase, Schober says. "It’s important to note that for the first time since 2009, values remained nearly unchanged in the second quarter," he adds.
Positive Forecast. Going forward, farmers should watch interest rates, the value of the dollar, commodity prices, weather and yields as they all influence land trends, recommends the Illinois Society of Professional Farm Managers and Rural Appraisers. The group expects farmland values to remain positive during the next five years, noting that three external factors play into the price jump: interest rates, mineral rights and taxes.
Because of the sharp climb in land values during the last several years, Iowa State University’s Mike Duffy, a farm management specialist, says he is observing a shift in farmland ownership. "The amount of land in Iowa owned by an individual over the age of 75 has been tracking up since 1982, when it was 12%," he says. "Today, about one-third of Iowa’s farmland is owned by someone over 75, but the crop boom seems to be slowing that down some."
The boom also seems to have slowed the number of people over the age of 75 in ownership of farmland, he says.
"There are younger owners, but they represent a small percentage of the acres," Duffy points out. "More than half, 56%, of Iowa’s farmland is owned by someone over the age of 65." Additionally, he says the number of absentee landowners has flattened out at about 21%.