By TIM ALEXANDER 
Illinois Correspondent 

PEORIA, Ill. — A pair of respected studies on Illinois farm real estate values show prices being paid for farmland continue to rise, with other farmers purchasing at least half of the available properties at record prices.

“There were actually less land transactions in the first half of 2008 and not as much land on the market. With demand as good or greater than ever, less supply and more demand means prices are up,” noted Bob Swires, chairman of the Illinois Land Values Conference.

Swires based his remarks on the results of the Illinois Society of Professional Farm Managers and Rural Appraisers’ (ISPFMRA) annual mid-year “snapshot” report on statewide farm values.

Respondents to ISPFMRA’s member survey indicated that farmland values increased by an average of 9 percent during the first half of 2008, with an average of $7,350 paid for excellent quality farmland – up from $6,295 at the beginning of this year.

Good quality farmland fetched an average of $6,630, while average quality land brought $5,590. Fair quality land averaged $4,230 according to the survey, which was conducted with assistance from Gary Schnitkey, Ph.D., University of Illinois.

A separate report, Fourth Year in a Row of Double-Digit Increases for Illinois Farm Real Estate Values – prepared by UoI extension farm financial management specialist Dale Lattz with data from the USDA’s National Agricultural Statistics Service – pegged the average farm real estate value for Illinois in 2008 at $5,000 per acre. The figure includes the value of all land and buildings.

Lattz reported that the $5,000 per-acre 2008 average is 15.5 percent higher than the 2007 average of $4,430. While the 2008 average is the second highest since 1977, it didn’t come close to eclipsing the 2005 value increase of 27.6 percent.

In Lattz’s study, farm real estate values in Illinois have shown a year-over-year increase every year since 1988 and have increased by 121 percent since 2000.

Farmers driving market

“There are all forms of potential buyers in the marketplace – local investors, non-local investors and institutional investors. But the biggest jump (in sales of farm real estate) is the local farmer-buyer,” Swires said. “That group was responsible for the biggest increase in percentage of sales.”

ISPFMRA’s report shows a little more than half of transactions went to farmer-buyers in the January-June 2008 period, while only a percentage “in the high 30s and low 40s” were responsible for transactions in 2007. Few 1031 exchange transactions were made during the period, according to the survey. Most purchases were on a cash basis.

Swires said farmers are returning to the marketplace because of overall good times in agriculture for grain producers.

“Their overall debt load is relatively modest, earnings are up significantly and land prices are going up. (Farmers) are starting to take advantage of that,” he said.

Lattz cited higher corn and soybean prices and the expectation that prices will remain high as prime drivers of the increase in farmland values.

Cash rents to soar

Cash rents are expected to increase as much as $43 per acre between the rest of this year and 2009, according to ISPFMRA’s report – from $238 for professionally managed farmland to $281.

Eighty-four percent of surveyed professionals expect flexible cash rental agreements to increase, while less use is expected of share rental agreements. Fifty-five percent expect “slightly more” or “more” traditional cash rental agreements next year.

Though available land was tighter in the first half of 2008, some respondents to the survey indicated they were anticipating an increase in land coming on to the market in 2009, Swires told Farm World.