DECATUR, Ill. — Compared to the last two years, the mid-year land values report, given by Luke Worrell chair of Land Values Conference, at the Farm Progress Show in Decatur on Aug. 30, was anti-climactic.
The snapshot of land values, sponsored by the Illinois Society of Professional Farm Managers and Rural Appraisers, shows stable land values in what he calls a “catch-your-breath” report after two years of a break-neck pace.
“It’s the first time in a long time I don’t have any crazy numbers to throw out,” Worrell said after land values increased between 40% and 50% in some cases during the last couple of volatile years.
“You can’t have 20% increases every year,” said University of Illinois ag economist Gary Schnitkey.
The report comes from a survey of Illinois Society members about what they saw in the first six months of the year and what they expect for the next six months. Not much has changed since the beginning of 2023, Worrell said.
“Some expected a drawback and frankly we have not seen that yet,” he said. “The market appears to be catching its breath.”
Prices paid for excellent and good quality farmland have been stable while average and fair quality land (averaging $5,900 in the March report) saw a slight decline of 2%, said Schnitkey, secretary/treasurer of the Illinois Society.
However, there are some exceptions. Class A land is selling higher than the state average of $17,000 for excellent land.
“A class A farm in Tazewell County sold on Aug. 29 for $20,800 and one in Morgan County sold on Aug. 31 for $23,000. So using the state average can be a little difficult when pockets of the state are exceeding the state average by a healthy clip,” Worrell said on Sept. 1.
In the survey, excellent land is described as having corn yields above 220 bu./acre on a normal year; good land has yields between 200 and 220; average land yields 180 to 200 bu./acre and fair land has yields less than 180 bu/acre, Schnitkey said.
Of survey respondents, 44% expect prices to remain the same for the rest of the year while 36% expect prices to drop between 1 and 3%. Only 13% of those responding expected values to increase and then only between 1 and 3%, the professor said.
While there were no big surprises in this report, Worrell, of Worrell Land Services in Jacksonville, Ill., said he was a little surprised to see how many of his fellow farm managers are managing land that has a lease with an energy company. Just over one-third of the farm managers said they have at least one farm with an arrangement with a wind company and 31% of them manage at least one farm with an agreement with a solar company.
He said he shouldn’t really be surprised by that because hardly a week goes by that he doesn’t get some kind of solicitation from an energy company or pipeline group. However, few of the many proposals go through and it does take time for those that do. He cites an example of one in his home county that took seven years for a project to be completed.
The sheer number of proposals for land for energy projects is part of a growing trend that has prompted the Society to offer education to their members on energy topics including carbon pipelines. “These things are new, we don’t know how well they will go,” Schnitkey said.
Meanwhile, an airplane with a banner flew over the Farm Progress Show stating its opposition to a pipeline.
Local farmers are still the biggest buyers of land coming in at 65% of buyers; 16% were local investors; 10% were non-local investors; and, 7% were institutions.
Most farm managers expect 2024 cash rents to remain the same or decline from 2023 levels. Average declines are -$7 for excellent farmland, -$5 for good farmland, -$5 for average farmland, and -$3 for fair quality land.
Lower commodity prices this year have been part of the reason for lower land values, Worrell said. They have more impact than the current higher interest rates, he said.
Illinois Society members estimate that the average corn prices this year will be $4.87/bu. and $13.05/bu. for soybeans.
Survey participants expected continued lower prices for commodities in 2023 compared to 2021 and 2022.
Mark Schleusener, Illinois State Statistician, also released the USDA National Agricultural Statistic Services for Illinois cash rents near the end of August, with numbers coming in lower than Schnitkey’s survey. Worrell says Illinois Society’s numbers are traditionally higher because they reflect lands specifically managed by professional farm managers.
As far as types of leases, Schnitkey said flex leases are gaining in popularity coming in at about one-third of rental agreements. People using them are usually very satisfied with them, Worrell said, noting that 97% of those surveyed said they were satisfied or very satisfied with the agreement.
The popularity of flex leases comes at the expense of cash rent leases which make up about 26% of the agreements today, according to the study.
The Society’s next report will be the annual summary gathered in December and January and reported on March 21 this year in Bloomington.