The value of Illinois farmland rose 20% to 21% in 2011, according to an annual survey conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers. Top prices reported by the survey ranged from $10,000 an acre to $13,000 an acre across the state.
The top price of $13,000 per acre was for a November 2011 sale of 37.7 acres in Christian County. The property was listed as having Excellent quality land. Sales in the $10,000 per acre range were common across a number of regions in the state. "A good part of this tremendous move in Illinois crop land values is based on increasing farm income returns, and expectations of strong income into the future," says Don McCabe, AFM, Soy Capital Ag Services, and general chairman of the Land Values Survey and Conference. 5
Respondents indicated that farmland values increased between 20% and 21% across land classes during 2011, says Gary Schnitkey, Ph.D., Department of Agriculture and Consumer Economics, University of Illinois. "Prices of excellent productivity farmland was estimated at $8,690 per acre price on January 1 and $10,460 per acre price on December 31st, an increase
of 20% percent during the year. Good quality farmland price was estimated at $7,490 at the beginning of the year and $8,980 at the end of the year, an increase of 20%. Average farmland's price was $6,080 per acre at the beginning of 2010 and $7,330 at the end of year, an increase of 21%. Fair productivity farmland's price was $4,880 at the beginning of the year
and $5,900 at the end of the year, indicating a price increase of 21%."
Rents Rising As Well
"Given the variability of land quality and regions, and the aggregation of data over many sale and rent observations, the traditional relationship of the market to price land at levels where income results in a "cap rate" of 3% to 5% continues to hold. Rents drive the rate of return in relation to land values; land prices do not trigger or cause rental returns," McCabe explains.
According to survey results, traditional fixed cash rent leases increased for 2012 to 32% of all farm operating arrangements. All other types, totaling 68%, include a variety of crop share and variable cash rent leases, and custom farming contracts. This 68% majority of farm operating agreements include features where the landowner shares, in some way, in the farm's crop production and/or price risk, and is rewarded when yields and prices are good.
Cash rents increased a great deal between 2011 and 2012, Schnitkey explains. "For excellent quality farmland, rents increased $60 per acre from $319 per acre in 2011 to $379 per acre in 2012. Increases were $60 per acre for good quality farmland, $50 per acre for average quality farmland, and $35 per acre for fair quality farmland.
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