Illinois Farmland Values Up 18%, May Have Plateaued: Survey
Farmland prices across Illinois have maintained their strength from 2021 with an average increase of 18 percent over the same period one year ago. However, the peak may have been reached as a flattening in prices paid for farmland in Illinois is expected for the second half of this year.
This is the information coming from the Mid-Year Farmland Values Snapshot Survey sponsored by the Illinois Society of Professional Farm Managers and Rural Appraisers. The group conducts a survey of its members halfway through the year to evaluate trends in farmland prices and cash rents. This information supplements the Society’s larger efforts at year-end to document farmland prices and cash rents across Illinois. The survey was done in the first two weeks of August and the results were presented August 31 at the Farm Progress Show being held in Boone, IA.
Gary Schnitkey, Ph.D., University of Illinois, and Luke Worrell, AFM, ALC, overall chair of the Society’s annual Land Values and Lease Trends program, reported the findings of the survey.
Key points stressed by Worrell included:
- During the first half of 2022, farmland prices rose by 18%. The strong market during the first half of 2022 continues the increasing market from 2021. Survey participants do not expect as large an increase in the second half of 2022.
- Cash rents in 2023 are expected to increase by $17 per acre on excellent productivity farmland. Lower productivity farmland is projected to have lower increases, with fair productivity having an $8 per acre projected increase.
- Survey participants expect prices for the 2023 crop to average $5.60 per bushel for corn and $13.20 per bushel for soybeans. These prices are a continuation of the strong commodity prices seen since the beginning of 2021.
- Over time, Society members have slowly increased use of variable cash rental arrangement such that 31% of the leases are now variable cash agreements. The slow increase is expected to continue.
Schnitkey noted that the average price increase of 18 percent occurred across all Illinois and land productivities. He added that over half of those responding to the survey feel that prices have reached a plateau with 56 percent expecting prices to remain the same during the second half of 2022. Fifteen percent expect prices to decrease between 1 and 3 percent while 12 percent expect similar increases. All expect interest rates to increase in the second half of the year. The group was equally divided in the amount of rate increase being over or less than 1 percent.
Cash Rents in 2023
Rents are expected to go up in 2023 over 2022 levels with expectations to be $17 per acre higher for excellent productivity land and $8 per acre for fair productivity land.
(Note: In a normal year, excellent quality farmland averages over 210 bushels of corn per acre with a soil productivity index of 133 or higher, good quality farmland averages between 190 and 210 bushels per acre with a soil productivity index of 117-132, average quality farmland averages between 170 and 190 bushels per acre with a soil productivity index of 100-116 and no irrigation, and fair quality farmland averages below 157 bushels per acre with a soil productivity index under 100.)
As to prices paid for corn and soybeans for the 2022 crop, the average across all responses was $5.60 per bushel for corn and $13.20 per bushel for soybeans. The expectation is a continuation of strong prices for these commodities.
Wind, Solar, Wheat and Organics
- 40% of the farm managers have at least one farm with an arrangement with a wind company.
- 38% of the respondents manage at least one farm with an agreement with a solar company.
- 33% of farm managers expect some increase in wheat acres, with more managers in southern Illinois expecting increases.
- 33% of the farm mangers indicate that there is more interest in converting conventional farmland to organic farming.
Respondents indicate the following use of alternative leases:
- 26% are share rent leases
- 12% are modified share rent leases
- 26% are cash rent leases
- 31% are variable cash rent leases
- 5% are custom farming
There has been a movement to variable cash rent leases among farm managers over time.
- The farm managers see no large changes in rental arrangement use in 2023, but some do expect to see an increase in variable cash lease arrangements.
- The average supplemental rent on a share rent lease is $35 per acre.
Variable Cash Rent Arrangements
For variable cash rents, the most common cash rent has a base cash rent regardless of prices, yields, or incomes. A bonus payment enters the calculation based on revenue.
- 85% of variable cash rents have a base rent that is paid regardless of prices, yields, or incomes
- 78% have a payment if revenue exceeds specified levels
- 5% have a payment based on revenue where the revenue begins at $0
- 17% have a payment based on price
- 12% have a payment based on yield
- 3% have costs of production enter the calculations of rent
When yields enter rent calculations, farm yields are used in 90% of the cases. County yields are used in the other cases.
When price enters into rent calculations, multiple prices at delivery points are the most common method for arriving at the price.
- 52% of leases use multiple prices at a local delivery point
- 38% use futures prices
- 5% use actual marketing
- 5% use one price at a delivery point
Crop insurance payments and/or government payments are used in calculating rent payments in 30% of the leases.
When gross revenue is used to calculate a bonus, the average percentage is 35% for corn and 38% for soybeans.
Most respondents are satisfied with the performance of variable cash leases:
- 48% indicate they were very satisfied
- 42% indicate they were satisfied
- 10% indicate they are neutral
Most respondents indicate that variable cash rent arrangements make negotiations easier as compared to fixed cash rent arrangements:
- 20% indicate that negotiations were much easier
- 60% indicate that negotiations were somewhat easier
- 17% indicate that negotiations were about the same
- 3% indicate that negotiations were harder
Most respondents indicated that lease terms do not change every year:
- 20% indicate that every year some terms of the lease change
- 3% indicate that changes occur every other year
- 52% indicate changes occur periodically
- 25% indicated that lease terms change seldom
Gary Schnitkey, Ph.D., University of Illinois College of ACES
Luke Worrell, AFM, ALC, Worrell Land Services