By TIM ALEXANDER
Illinois Correspondent

DANVILLE, Ill. — Illinois farmland values remain a steady investment compared to low-interest CDs and bonds, according to Bob Swires, AFM, president and owner of Swires Land and Management in Danville, who addressed farmland market trends during the Illinois Society of Professional Farm Managers and Rural Appraisers’ (ISPFMRA) 2010 Illinois Land Values Conference.

The results of ISPFMRA’s annual survey of farmland values were revealed by Swires and other land management professionals in Bloomington, Ill. on March 18. According to the survey, a strong market for Illinois farmland can be credited to the limited amount of farmland for sale, local farmers purchasing more land to expand their operations and a lack of demand for recreational tracts.

“Farmland prices are a function of supply and demand,” Swires told Farm World, “and there is currently excellent demand for Illinois farmland but very limited supply. The lack of supply is nosing prices up.”

Farmland values in central Illinois were steady to up seven percent, though prices varied throughout the state. “In the Belleville-Edwardsville area (southwest Illinois) farmland might have been a little softer, but most of the rest of the state was steady to slightly up,” Swires explained.

“The number of (overall) farmland sales is down significantly, and that makes identifying trends a little more challenging. There are very few motivated sellers out there who are sitting on their farmland.”

Historically high commodity prices are another factor helping to keep farmland values steady, Swires continued. “Although it doesn’t follow the movement as fast as changes in the grain market, commodity prices translate into income,” he said. “(Prices) are still higher. If you go back to early in 2007, the price of corn had a two in front of it, and today it’s anywhere from $3.50 to $3.75. Soybeans had a six in front of them and now they have an eight or a nine. “At the start of 2009 (farmland values) were in somewhat of a slide coming off of high commodity prices, the bad economy and sky-high input costs for farmers. But input and fertilizer costs have come way down, and while grain prices are down from those (2008) levels, they are still historically high.”

The ISPFMRA study revealed that the majority of farmland buyers in 2009 were local farmers looking to expand their operations and a mix of local and non-local investors. Perhaps due to the current recession, there were no 1031 investors in farmland.

“Sometime in 2007 the number of (1031 investors) started to fade away,” said Swires, who summarized the results of the 2010 Farmland Values and Lease Trends Report during the 2010 Illinois Land Values Conference along with Gary Schnitkey from the University of Illinois College of ACES.

“There is no land being sold for development anyplace, and that is what generated the 1031 money. In the northern part of the state, tracts bought for development are now being resold for something more akin to farmland values.

Concerning farmland lease trends, “the general consensus is steady to up,” Swires said. “We’re seeing more on the cash rent side, and an increase in the number of flex rents (based on commodity prices and yields).”

The survey also showed that there is a lack of demand for recreational and transitional farmland tracts. In addition, most 2009 sales were conducted on a cash basis with most sales not being mortgaged.

Some sales in central Illinois and in Morgan and Sangamon counties exceeded the $8,000 per acre mark last year.
To order the 2010 Farmland Values and Lease Trends Report, go to www.ispfmra.org