Survey Finds Illinois Farmland Values Jump 20%, Rents Up 11%

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Note: In the following, reference is made to different qualities of farmland. 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 1570 bushels per acre with a soil productivity index under 100.

The Illinois Society of Professional Farm Managers and Rural Appraisers conducts a survey 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.
Key points from the mid-year survey:

• During the first half of 2021, farmland prices rose by 20%. ON a statewide basis, farmland prices had a 20% or higher increase in only four out of 51 years since 1970, or less than 8% of years.

• Cash rents in 2022 are expected to increase by 11% over 2021 levels

• Society members generally have an optimistic but tempered outlook over the next five years.

• Use of variable cash rental arrangements are expected to grow in use in 2021. Society members generally have a base cash rent, with an increase possible if revenue is above a threshold. Most Society members are satisfied with variable lease performance

• Of farm managers, 31% indicated that they had more interest in converting farmland to organic farming.

Farmland Prices During the First Half of 2021
1. Farmland prices increased across all of Illinois. From January 1 to July 1, 2021, farmland prices increased an average 20%. These increases occurred across all Illinois and all land productivities.

Farmland Price Expectations for the Second Half of 2021
2. None of the participants expect farmland to decrease in the second half of 2021, with 78% expecting farmland price increases.
– 33% expect farmland prices to increase more than 3%
– 45% expect farmland prices to increase between 0 and 3%
– 22% expect farmland prices to remain the same

3. Interest rates are expected to increase in the second half of 2021:
– 14% expect interest rates to increase over 1 percentage point
– 26% expected interest rates to increase by 1/2 percentage point
– 16% expected interest rates to increase by 1/4 percentage point
– 51% expect stable interest rates
– 2% expect interest rate decrease of 1/4 percentage point

Cash Rents in 2022
4. Most farm managers expect cash rents to increase in 2022 over 2021 levels. The average increase across land classes is 11%.

5. Illinois Society members were asked their expectations of the selling prices of the 2022 crop. The average across all responses is:

– $4.86 per bushel for corn
– $12.52 per bushel for soybeans

These prices would be higher than the 2014 to 2019 averages but likely below selling prices for the 2021 crop.

Farmland Price Expectations Five-Years from Now
6. Illinois Society members were asked whether they expect farmland prices to be higher or lower in five years. While most Society members expected farmland prices to be higher than they are today, they do not expect rapid increases in farmland prices, with 51% believing that farmland prices will only be 1 to 10% higher. A significant minority (24%) believe that farmland prices will be lower in five years than today.
– 16% expect farmland prices to increase by more than 10%
– 51% expect farmland prices to increase between 1 and 10%
– 10% expect farmland prices to remain the same
– 16% expect farmland prices to decrease between 1 and 10%
– 6% expect farmland prices to decrease more than 10%

7. In five years, most Society members expect cash rents to be modestly higher than they are now, with 51 percent believing that farmland to be 1 to 10 percent higher.
– 4% expect cash rents to be 20% higher
– 25% expect cash rent to be 10% to 20% higher
– 51% expect cash rents to be 1 to 10% higher
– 12% expect cash rents to be about the same
– 4% expect cash rents to be 1 to 10% lower
– 4% expect cash rents to be 10% to 20% lower

8. Most Society members expect inflation over the next five years, with 29% expecting inflation to pose a problem. Most believe that moderate or low amounts of inflations will occur.
– 29% expect inflation to be a problem over the next five-years
– 57% expect a moderate amount of inflation
– 14% expect low amounts of inflation
– 0% expect no inflation

9. Most Society members expect rising interest rates over the next five years, but none expect explosive growth in interest rates
– 0% expect interest rates to be more than 5 percentage points higher in five-years
– 41% expect interest rates to increase 2 to 5 percentage points
– 57% expect interest rates to increase by less than 2 percentage point
– 2% expect interest rates to remain the same
– 0% expect interest rates to decrease

10. The average expected corn and soybean price in five years is higher than in years from 2014 to 2019 but lower than current farmland prices.
– $4.52 is the average price of corn expected by Illinois Society members
– $11.58 is the average soybean price expected by Illinois Society members

Rental Arrangements
11. Respondents indicate the following use of alternative leases:

22% are share rent leases
16% are modified share rent leases
37% are cash rent leases
19% are variable cash rent leases
6% are custom farming

12. Shifts in rental arrangements occur slowly over time. Many farm managers expect a shift to more variable cash rental arrangements.

13. The average supplemental rent on a share rent lease is $29 per acre.

Variable Cash Rent Arrangements
14. 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.
– 84% of variable cash rents have a base rent that is paid regardless of prices, yields, or incomes
– 84% have a payment if revenue exceeds specified levels
– 3% have a payment based on revenue where the revenue begins at $0
– 12% have a payment based on price
– 6% have a payment based on yield
– 6% have costs of production enter the calculations of rent

15. When yields enter rent calculations, farm yields are used in 96% of the cases. County yields are used in the other cases.

16. When price enters rent calculations, multiple prices at delivery points are the most common method for arriving at the price.
– 57% of leases use multiple prices at a local delivery point
– 31% use futures prices
– 3% use actual marketing
– 9% use one price at a delivery point

17. Crop insurance payments and/or government payments are used in calculating rent payments in 41% of the leases.

18. When gross revenue is used to calculate a bonus, the average percentage is 35% for corn and 41% for soybeans.

19. Most respondents are satisfied with the performance of variable cash leases
– 16% indicate they were very satisfied
– 64% indicate they were satisfied
– 20% indicate they are neutral
– 9% indicated that they were dissatisfied

20. Most respondents indicate that variable cash rent arrangements make negotiations easier as compared to fixed cash rent arrangements.
– 16% indicate that negotiations were much easier
– 58% indicate that negotiations were somewhat easier
– 20% indicate that negotiations were about the same
– 6% indicate that negotiations were harder

21. Most respondents indicated that lease terms do not change every year
– 10% indicate that every year some terms of the lease change
– 3% indicate that changes occur every other year
– 68% indicate changes occur periodically
– 19% indicated that lease terms change seldom

Organic farming
22. Of farm managers, 31% indicated that they had more interest in converting farmland to organic farming.