Farmland prices in Illinois are declining, and even though the decline is not having a big impact on farmers right now, the prices on their balance sheets might cause the assets on their farmland to keep going down.
Gary Schnitkey, an agricultural economist with the University of Illinois and contributor to the annual “Illinois Farmland Values and Lease Trends” report, which is published by the Illinois Society of Professional Farm Managers and Rural Appraisers, said land prices have dropped between 5 percent and 12 percent, depending on the land quality.
Commodity prices have been on the decline since 2013, and it’s part of a domino effect that is impacting farmers across the state, according to Schnitkey.
“Those declines in commodity prices have caused lower returns,” Schnitkey said. “Lower returns to farmland mean lower cash rent and falling land prices.”
Farmland price declines are generally associated with lower farmland returns, which is also impacting lease and rent rates, Schnitkey said.
“Cash rents came down about $20 to $25 per acre on average, according to the Illinois society, and that would be for professionally managed farmland,” Schnitkey said.
Farm managers will have to reassure land owners that farmland is still a good investment with good returns over time, despite these declines, and they need to keep a lookout for three things that might negatively impact the value of their land going into 2018, Schnitkey said.
“One is falling commodity prices, the second thing would be increases in interest rates, and the third thing would be the elimination of the ethanol mandate,” according to Schnitkey.
–Illinois News Network