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Illinois farmland values finally cool
New survey shows excellent and good quality land prices are down 5%. Lower cash rents are expected.
3 Min Read
LAND VALUES: “Farmland values are softening, but we’re certainly not jumping off a cliff,” says Luke Worrell, managing broker and farm manager at Worrel Land Services LLC in Jacksonville, Ill. Mike Wilson
After consecutive years of record sales, Illinois farmland prices finally cooled in the first half of 2024 and will likely continue to soften throughout the year. That’s according to a midyear survey of 75 Illinois farmland managers and rural appraisers released at this week’s Farm Progress Show in Boone, Iowa.
Values for Illinois land rated excellent and good quality are off 5%, while values for average and fair quality land are off 8% to 10%.
“Farmland values are softening, but we’re certainly not jumping off a cliff,” says Luke Worrell, managing broker and farm manager at Worrell Land Services LLC in Jacksonville, Ill. “While values, rents and income are down, we’re coming off a meteoric spike in land values in 2022, so it’s not unexpected. It’s a correction, not a crash.”
The survey was conducted in mid-August by University of Illinois ag economist Gary Schnitkey and the Illinois Society of Professional Farm Managers and Rural Appraisers. Worrell, chair of the society’s Land Values and Lease Trends Report, says higher interest rates and lower gross farm income contributed to the survey results.
Other highlights:
Farmers are still the predominant buyers of farmland, making up 63% of that category. This is followed by 16% local investors, 11% nonlocal investors and 9% institutional buyers.
Of sales in the first half of the year, half were estate sales. More transactions are being done through listings rather than auctions, and Worrell expects to see more sporadic or “no sale” results. Over half of those surveyed expect more sales through listings, while 31% expect listings and auctions to be about the same. Only 14% expect more sales via auctions.
Compared to the 2023 survey, respondents are more pessimistic about farmland prices. Some 89% expect continued price declines, while 11% expect farmland prices to remain the same. Nearly half expect declines of more than 3%, while 42% expect declines less than 3%; some 11% expect farmland prices to be constant the rest of 2024.
Along that same vein, some 53% expect prices to be lower two years from now, while 38% expect farmland prices to be about the same.
Wind and solar contracts on Illinois farmland are trending higher. About one-third of farm managers have those contracts on at least one farm they manage, “and we expect that to move higher,” Worrell says.
Lower cash rents, more flex leases
Cash rents are expected to decline 7% to 9% in 2025, or around $25 per acre. Cash rents increased from 2000 to 2023, remained stable in 2024, and are now likely to decrease into 2025.
Most Illinois farm managers expect 2025 rents to be lower than 2024 rents.
Flex leases continue to gain popularity among Illinois farmers and landowners. Farm managers and rural appraisers surveyed now say some 35% of leases they work with are variable cash agreements. Why? Cash rent leases tend to reflect what happened a year earlier, while a flex lease reflects current profit risk. Many say negotiating flex leases is much easier than negotiating a straight cash lease.
Most of the so-called flex leases have a guarantee base payment along with a bonus payment based on a previously agreed price and yield calculation.
“When asked, over 90% said they were at least satisfied, and 50% said they were very satisfied with flex leases,” Worrell says.
Of those who responded to the survey, 25% use share rent leases, 9% use modified share rent leases, 25% use cash rent leases, 35% use variable cash rent leases and 7% custom farm.
The complete survey information is available at ispfmra.org.
Editor’s note: In a typical year, excellent quality Illinois farmland averages over 220 bushels of corn per acre with a soil productivity index of 133 or higher. Good quality farmland averages 200 to 220 bushels per acre, with a soil productivity index of 117 to 132. Average quality farmland averages between 180 and 200 bushels per acre, with a soil productivity index of 100 to 116 and no irrigation. Fair quality farmland averages below 180 bushels per acre, with a soil productivity index under 100.
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