By STEVE BINDER
DECATUR, Ill. — Values for top-producing farmland in Illinois have stabilized for the first time in nearly three years, according to two recent surveys, but prices for lower-quality land have dropped by nearly 5 percent.
While commodity prices remain low, and with farm returns on the decline for the past several years, the surveys’ results are encouraging because mostfarmland as well as cash rents are holding steady and haven’t dropped in a similar fashion as net returns.
“Some of the lower-quality land has probably slipped about 4 percent or so,” said Dave Klein, of Bloomington, Ill.- based Soy Capital Ag Services. “We’re calling Class A land down 1 percent, but to be real honest I can show arms-length transactions are steady.”
Klein announced the results of the Illinois Society of Professional Farm Managers and Rural Appraisers survey that covers the first half of 2017 at the recent Farm Progress Show in Decatur.
It tracks well with a survey covering the same period of time by Farm Credit Illinois, as well as with data maintained by University of Illinois ag officials. Farmland values of all classes of land in Illinois declined in the first half of 2017, compared to 2016, anywhere from 1.6 percent for higher quality ground to about 4.4 percent for lesser quality soil, said Gary Schnitkey, a University of Illinois professor and farm management specialist. The society’s survey placed the average price of excellent farmland at $10,900 per acre, down $200 from the group’s survey a year ago. A recent sale for land in Logan County, in central Illinois, went for $12,200 per acre, Klein said.
A general rule is that higher quality land has a higher demand for it, and Klein said that theory is helping keep top tier ground from dropping at higher rates.
Demand for lower quality farmland isn’t as strong, and prices therefore have fallen at higher rates, he said.
For good quality land, the society’s survey found an average price of $8,900 per acre, compared to $9,400 the year before. Average quality farmland came in at $6,900 per acre, down from $7,600 last year while fair quality land is averaging $5,000 an acre, 14 percent less than last year’s average of $5,800.
“In general, we continue to see more of a drop off in those lower quality land classes,” Klein said. “Those also contain lower percentage tillable and things of that nature, so that’s where sometimes demand is a little bit less and we see some reduction in values.”
For every 10 farmland purchases so far this year, seven were made by farmers, according to the survey. Those who participated in the survey also said they don’t expect any significant changes in cash rents, saying any drop would be limited to no more than $5 or $10 per acre.
Klein said it is unlikely that recent tax changes approved two years ago by Illinois lawmakers has had any effect on land values; the tax changes were implemented to provide equity among all levels of farmland quality, and it led to higher percentage tax increases for lower quality ground.