Russell Hiatt is president-elect of the Illinois Society of Professional Farm Managers and Rural Appraisers, the forerunner to the national organization. Hiatt is accredited by the American Society of Farm Managers and Rural Appraisers.
He follows in the footsteps of his father, and has been in the profession since 1979. He previously managed farms and did rural property appraisals in a bank setting, but in 2017 went into private practice with his brother when they opened Hiatt Enterprises LLC. The company is based in Champaign and has offices in Pontiac and Danville.
IFT: Yours is obviously a historic organization, being the first of its kind in the nation. What is the association’s value, and why should landowners seek professionals who are members?
HIATT: The purpose of our organization is not only to provide a network to interact, share ideas and work with changes in legislative issues, but it is a responsible body that gives the public some level of confidence in the people who own membership in this organization. If you’re accredited, you have been given that designation through rigorous testing. This individual knows what they’re doing. It’s like getting a CPA. They are fulfilling a fiduciary responsibility to the public.
IFT: What is the background of your clientele?
HIATT: Most are non-farming owners. Virtually every one of the landowners we represent are not actively engaged in farming. I would estimate that half of our clientele either grew up on the farm but did not pursue farming, or had parents who grew up on the farm and inherited from their ancestors but chose not to go in agricultural production. The rest is purchased farmland because of the quality of the investment.
IFT: The price of some farmland shocks many who see higher and higher values placed on land in the Corn Belt. What is your impression of the price of farmland today?
HIATT: We’re at historically high values. We have never seen prices this high. We have not seen the percent of increase in farmland values year over year for the past three years. Certainly 2021-22 were years when farmland prices were starting to increase.
IFT: In your experience, what is the most you’ve seen farmland sell for?
HIATT: Right here in my area we have documented $20,000 and $21,000 an acre for top-quality land with no development uses. That’s the top we’ve had at public auctions. It tends to be ground that gets 260- or 270-bushel corn and 75- to 80-bushel soybean yields. Quite frankly, it wasn’t too long ago when I said $8,000 an acre is a lot of money to pay for farmland. And boy, don’t I wish I would have bought everything I could at $8,000 five years ago.
IFT: Are we at a breaking point on land prices?
HIATT: I think we’re seeing not a correction, but a resting point. It’s an economic force. I’ve heard the argument that farmland is priced right where it should be considering demand for the product. On the other hand, if you look at where interest rates are going, the cost of production and commodity relative to productivity in what used to be minor producing countries, the market may see things getting too high. It’s an old economic cliché that nothing cures high prices like high prices.
IFT: Real estate has been an attractive investment option for many lately because of the poor performance of the stock market. Now, with the Fed raising interest rates to combat inflation, will that help bring down farmland prices? And if so, is it still a solid investment?
HIATT: From a long-term perspective, interest rates contribute more long-term than commodity prices. Commodity prices change daily. I have a feeling that land prices are already starting to slow down because interest rates have come up so quickly. I don’t think I’ve ever been able to work with a client and say this is a good time to buy because it will cash-flow itself; it never has. But you’ll find that going back to the Depression, farmland really has been a very competitive long-term investment, compared to others, including the stock or bond markets.
IFT: Farm leases are as varied as farms themselves. In the past, the majority were either crop share or cash rent. In the modern era landowners and farmers are developing more complex agreements. What is typical today?
HIATT: Among the ones I manage, 95% are cash-rents that are some version of a flexible lease. There is a guaranteed minimum and additional rent if the year turns out to be better than what we expect – a bonus payment.