A Closer Look at Illinois Farmland Values and Cash Rents

Brad Zwilling indicated today at the farmdoc daily blog (“Slight Decrease in Illinois Farm Real Estate for 2016“) that, “Each year the National Agricultural Statistics Service of the USDA releases estimated average farm real estate values by state. The estimates are based on surveys of farmers from selected geographical areas. The surveys follow strict statistical guidelines. Estimated values maybe revised the following year based on additional information. Revisions may also be made based on data from the 5-year Census of Agriculture. The methodology and timing of the study has changed over time but the statistical information provides some insight as to the changes in farm real estate values from year to year.

“The average Illinois farm real estate values from 1970 through 2016 are listed in Table 1 and graphically in Figure 1. The average farm real estate value for Illinois in 2016 was $7,400 per acre. This includes the value of all land and buildings. The figure was 1.3 percent lower than the 2015 average of $7,500 per acre. The 2016 decrease is the second since 2009 and only the third decrease since 1987. Even with the slight decrease in 2016, Illinois farm real estate values have increased 19 percent in five years and 84 percent in 10 years.”

And with respect to cash rental rates in Illinois, University of Illinois agricultural economist Gary Schnitkey indicated yesterday at the farmdoc daily blog (“2016 Cash Rents and Land Values for Illinois“) that, “On August 5th, the National Agricultural Statistical Service (NASS) released estimates of statewide cash rents and farmland values for 2016. For Illinois, the 2016 cash rent was $221 per acre, down by $7 per acre from the 2015 value.”

Dr. Schnitkey added that, “Corn prices received by farmers averaged $5.07 per bushel in 2010, $6.24 per bushel in 2011, and $6.93 per bushel in 2012. Since 2013, corn prices have been below $4.00 per bushel most of the time. This fall in corn price corresponded to decreases in other commodity prices, and led to per acre revenue being below per acre costs, resulting in the need to reduce costs by about $100 per acre (farmdoc daily September 1, 2015). Some progress has been made in reducing costs: 1) fertilizer prices decreased in 2016 (farmdoc daily June 28, 2016) and 2) capital purchases were reduced which will cause reductions in machinery depreciation over time. Decreases in average cash rents in 2015 and 2016 also aided in reducing costs.

“Still, reductions in costs occurring up to this point do not result in costs being below revenue. Therefore, a continuing need to cut non-land costs and cash rents exists. Recent declines in commodity prices lead to low revenue projections for both 2016 and 2017, further aggravating the need to reduce costs (farmdoc daily August 2, 2016). On average, cash rent decreases in the future must be larger than the $12 per acre decrease that occurred during the last two years if costs are to be below revenue.”

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