Illinois Land Value and Land Rent Trends
Gary Schnitkey
University of Illinois
Topics
1.
2.
3.
4.
Current farmland prices
Current farm returns
Rent and price projections
Uncertainty in the future
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Illinois Land Values and Cash Rents
2006: $3,640
2014: $7,700
2015: $7,650
2016: $7,450
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2017
Illinois Farmland
Values
& Lease Trends
Understanding Our Farmland
Categories
Using the Productivity Index from the University of
Illinois (Bulletin 811).
Excellent Productivity – 147 to 133
Good Productivity – 132 to 117
Average Productivity – 116 to 100
Fair Productivity – Less than 100
Recreational Tracts
Transitional Tracts
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2016 Excellent Quality Farmland
Mid Range
Land Value
Comments
Region 1
$10,500
Higher supply of land south of Illinois River led to more
decrease there. Some new 1031 exchange money in
the market supporting values.
Region 2
$11,500
Farmers still the main land buyers.
sales still over $12,000/acre.
Region 3
$11,000
Low volume with sellers resisting lower prices.
Location has become much more important to high
sales prices.
Region 4
$10,750
Wider range of prices than 2015. Bare, square, high
percentage tillable bringing a premium. Low volume.
Region 5
$10,325
Prices down 5-8%. Same notes as Region 4 on volume
and price for premium tracts. Especially strong in
Champaign & Douglas Counties.
Region 6
$10,525
Down 8-9%. Larger disparity between low priced
tracts and high priced sales (Over $4,100/ac). Location
important.
Region 7
$12,200
Region 8
Region 9
Region
10
-$10,250
--
This region sustained the high quality land values
better than any other region. Evidenced by 888 ac.
Auction -March ‘17
$10,880
(average)
Tight supply. 9
2016 Good Quality Farmland
Mid Range
Land Value
Comments
Region 1
$8,200
Prices down ~7%, most found in Will County area.
Prices higher in the south and west side of this
Region.
Region 2
$8,000
Median sales price down 11%. Mostly farmer buyers
but investors were picking up opportunities. Wide
price range.
Region 3
$8,250
Less liquidity than the highest quality farmland. Field
shape & percent tillable really influenced price
negatively.
Region 4
$8,750
Higher volume than 2015. Prices declined early and
leveled out later.
Region 5
$7,950
Sought out by investors and farmers
“excellent” land seemed not available.
down~11%. Volume -20%.
Region 6
$9,425
Better quality “good farms” sold in 2016 vs 2015.
Longer marketing timeframe to move most tracts.
Region 7
$8,755
Several option
“1031’ed” into
landowners.
Region 8
$10,700
Region 9
$8,800
Very similar price to 2015.
Region
10
$8,000
Similar price average to 2015-or a little higher. Wide
range in price per acre.
when
Price
or easement payments being
farmland purchases by local
“The best soils” in this region. This average actually
rose likely as compared to 2015.
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AgLetter
Chicago FED, May 2017
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Source: 2016 Farmland Value Survey Iowa State University,
December 2016
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Net Farm Incomes on Grain Farms
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Why 2016 Income Higher?
• Good corn soybean yields
• Relatively good soybean prices
• Reductions in non-land costs
• 2015 ARC payments received in 2016
• Inventory gain:
– Corn: $3.60 end-of-year 2015 inventory price, $3.65 old crop
price
– Soybeans: $8.60 end-of-year 2015 inventory price, $9.40 old
crop price
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Financially What Is Happening
• Strong financial farms at the end of 2012
• Since 2012, many farms are eroding working
capital
– Grain inventories and prepaid expense down
– Operating loan balances up
• Most farm have strong equity and solvency
• Some farms have difficulty showing positive cash
flow
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Components of Current Assets
($ per acre)
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Operating Notes ($ per acre)
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Debt-to-Asset Ratio
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Market Year Average Prices and Forecasts
----------------------- Period --------------------75-05
06-13
14
15
16P
17P
Corn ($/bu.)
2.33
4.70
3.70
3.61
3.40
3.40
Soybeans ($/bu.)
5.95
10.91
10.10
8.95
9.55
9.30
Wheat ($/bu.)
3.25
6.25
5.99
4.89
3.90
4.25
Projection for 2016 and 2017 are WASDE projections,
Fall 2017 bids (east-central Illinois, June 2):
$3.65 corn
$8.96 soybeans
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November 2017, CME Soybean
Prices
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2016
15 billion production =
86.8 million x
174.4 bu/acre
2016
4.2 billion production =
83.0 million x
51.4 bu/acre
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Monthly Corn Prices, U.S.
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Gross Revenue, Corn,
Central Illinois, High Productivity
2015
Crop revenue (200 bu. x $3.77)
2016
2017
$754
Crop revenue (228 bu. x $3.54)
$807
Crop revenue (200 bu. X $3.70)
$740
ARC
45
20
15
Crop insurance
31
5
0
$830
$832
$6740
Gross revenue
Yields up in 2016 but prices are lower
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Corn, Revenue and Costs,
Central Illinois, Low-Productivity
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Gross Revenue, Soybeans,
Central Illinois, High Productivity
2015
Crop revenue (66 bu. x $9.08)
2016
2017
$599
Crop revenue (69 bu. x $9.85)
$680
Crop revenue (61 bu. x $9.00)
$549
ARC
45
20
15
Crop insurance
7
4
0
$651
$6704
$564
Gross revenue
Yields and prices are higher in 2016
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Soybeans, Revenue and Costs,
Central Illinois – Low-Productivity
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Central Illinois, High-Productivity, 2017
Corn
Soybeans
200
$3.70
61
$9.00
Crop revenue
ARC
Gross revenue
740
15
$755
549
15
$564
Direct
Power
Overhead
Total non-land cost
351
115
66
$532
159
103
61
$323
Operator and land return
$223
$241
Yield
Price
50% Corn -- 50% soybeans
$232
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Operator and Land Return and Cash Rents, Central Illinois,
High-Productivity Farmland
600
500
Operator and Land Return
400
300
200
Average Cash Rent
100
ISPFMRA Cash Rent
0
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
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15
16P
17P
Cash Rents, Illinois
250
$ per Acre
200
150
2006:
2014:
2015:
2016:
$132
$234
$228
$221
100
50
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
Year
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Cash Rent by County, 2016
• Released by USDA,
September 9, 2016
• 2016 cash rents
• Average cash rents
for each county
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Average Rents and Corn Yields, Illinois
Trend Corn
Yield
Average
Cash Rent
140
$167
160
$178
180
$230
200
$281
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Average and Professionally
Managed Farmland, Illinois
Land Productivity
(Expected corn yield)
Averages
2014 2016
$/acre
2
Professionally Managed Farmland
2014
2015
2016
2017
$/acre
$/acre
$/acre
$/acre
State average
234
221
Excellent (190+ bushels)
293
281
374
350
325
300
Good (170 - 190 bushels)
243
230
322
295
283
260
Average (150 -170 bushels)
191
178
285
250
247
225
214
200
190
175
Fair (Less than 150 bushels)
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2018 Operator and Land Returns Estimates
Expected Price
Corn
Soybean
Price
Price
Operator and Land Return
CentralCentralNorth
High
Low
South
$/bu
$/bu
4.20
10.00
303
304
253
130
4.00
9.60
271
271
223
103
3.70
9.00
237
237
192
80
3.40
8.15
205
206
165
59
3.10
7.50
175
176
138
39
Bu/acre
Bu/acre
Bu/acre
Bu/acre
Expected corn yield
200
203
187
165
Expected bean yield
63
61
58
48
$/acre
$/acre
$/acre
$/acre
$250
$270
$225
$160
2017 Est. Cash Rent
Operator and Land Return ($/acre)
10-year Treasury Note Yields
Nov 7, 2016: 1.83%
Dec 1, 2016: 2.45%
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Land Values
• Price have risen because of
– Increasing returns
– Lower interest rate
𝐂𝐚𝐬𝐡 𝐑𝐞𝐧𝐭
𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐢𝐳𝐞𝐝 𝐕𝐚𝐥𝐮𝐞 =
𝟏𝟎 − 𝐲𝐞𝐚𝐫 𝐓𝐫𝐞𝐚𝐬𝐮𝐫𝐲 𝐫𝐚𝐭𝐞
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Illinois Farmland Price and Land
Values
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UNCERTAINTIES IN THE
FUTURE
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Electric Cars
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Work to grow hamburger in a Petri dish
inside a laboratory
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http://www.worldometers.info/population/ch
ina-eu-usa-japan-comparison/
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Long-term Challenges
• Electric cars
• Change in diet away from meat
• Exports to China and other incomegrowth countries
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Summary
• Stable to eroding land prices
• Cash rents into 2018
– Stable if $3.70 corn/$9.30 corn
– Decreasing if mid to low $3.00
• Uncertainty on demand
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