Significant increases in Illinois farmland value during 2022

BLOOMINGTON, Ill. — The average of all classes of farmland in Illinois increased in value during 2022, according to the Illinois Farmland Values and Lease Trends report.

“Every classification of land saw pretty significant increases,” said Luke Worrell, general chairman of the Illinois Land Values Conference presented by the Illinois Society of Professional Farm Managers and Rural Appraisers.

The 28th annual report, published by the ISPFMRA, includes information on excellent, good, average, fair, recreational and transitional tracts.

“The Class A average increased 16%, the Class B average is up 17%, Class C increased 7% and recreational land was up 17%,” said Worrell, the co-owner of Worrell Land Services and president of the Realtors Land Institute.

“We saw an enormous amount of transitions, up 17% from the year before and 25% more Class A farms were sold,” he said. “From the past two years, there are 58% more transactions to look at.”

In addition to averages for Illinois, the report divides information into 10 regions of the state.

“I was surprised to see the strength in the recreational land. Regions 3, 6 and 7 all saw increases of at least 20%, so it’s not just about the high PI tracts — we saw strength across the board,” Worrell said.

“Of all the classifications across all the regions, the only two that decreased were the average tracts in Region 6 and the excellent tracts in Region 8,” he said.

Looking forward, Worrell said inflation is an issue for farmland values.

“Government payments are not expected this year and the farm bill also expires this year,” he said. “And it’s a small world so there’s the Russian aggression and South American weather.”

However, Worrell said the farmland market is still really strong.

“But the market feels a little different,” he said.

“The number of transitions during the first couple of months this year pale in comparison to the activity we saw last year,” he added. “There are not as many properties listed, so a leveling off is probably expected.”

Interest rates may have an impact on some farmland sales.

“Last year, interest rates were at 3.5% and now the rates are 8%, so that has to play a role with some buyers,” Worrell said.

The annual report includes the results of a leasing survey of the members of the Illinois society.

The leasing survey provides information about excellent, good, average and fair land qualities, as well as net incomes for crop share, cash rent and custom farming leases.

“All of the incomes from these leases were really good in 2022,” said Gary Schnitkey, professor of agricultural and consumer economics at the University of Illinois.

A chart in the report shows the per acre cash rents in 2023 for the High 1/3, Mid 1/3 and Low 1/3 for each land productivity.

“There is a considerable range,” Schnitkey said.

Cash rents for the excellent quality of the High 1/3 is $454 per acre down to the fair quality land of the Low 1/3 at $164 per acre.

“These numbers are from professional farm managers and rural appraisers who are much more reactive to the economic conditions,” Schnitkey said. “Farm managers are more attuned to what’s going on in the farm economy than others, so the numbers tend to go up and down more.”

In 2013, the high was $396 per acre for excellent productivity land for the Mid 1/3 of cash rent leases.

“It came down quite a bit until this year, where it’s back to $412,” Schnitkey said. “Since there were very good farm returns in 2022, high cash rents make sense.”

For leasing arrangements, 36% of the farm managers use variable cash rent leases and 27% use traditional cash rent leases.

“We’re seeing a shift to more variable cash rents amongst professional farm managers,” Schnitkey said.

None of the farm managers manage farms that are in the carbon market, the university professor said.

“If the income is $30 and above per acre, that seemed to get people interested in carbon markets,” Schnitkey said.

“Five years from now, 21% of the farm managers expect a very small percentage of acres to be enrolled in carbon markets and 57% expect less than 10% of Illinois acres to be enrolled, so overall a limited number of acres,” he said.

“For expectations of farmland price changes in 2023, 38% expect it to stay the same,” he added. “It is pretty equally divided between those that think farmland prices will increase and those that think it will decrease.”

Most of the farm managers are expecting stable land markets of minus 5% to plus 5%, Schnitkey said.

“That will seem tame compared to what we’ve seen over the last several years,” he said. “And for methods of sales, we continue to see public auctions and multi-parcel auctions increase.”

For more information about the Illinois Society of Professional Farm Managers and Rural Appraisers, go to www.ispfmra.org.