|
 As farm ground, the
production here exceeds national averages for growing corn and
beans, especially with new hybrids and GMOs. The high production in
these three counties is what has kept farming here alive, away from
bankruptcy, and able to survive even with lower crop prices.
As a result of its productivity, land prices in central Illinois and
these counties has continued to remain stable at very high levels
despite the ongoing lower price of corn and beans. The National
Agricultural Statistics Service shows that the national average for
cropland was $2,060 in 2005 and $4,090 per acre in 2017, while the
three key Illinois counties reached a high in excess of $17,000 an
acre in 2005 and has currently settled down to around $12,000 an
acre, often however bringing as much as $15,000 an acre.
Because of its high price and high value, local land speculators
have bought tracts at auction and sold them a short time later at a
substantial profit.
Sources say, however, that if left to their own, central Illinois
acreage would level out at somewhere between $3,000 - $5,000 an acre
if merely linked to productivity and local market pricing. This is
still above the national average. When only local purchasers were
buying land that goes up for sale, prices were much lower.
However, some unlikely market forces have been participating in land
auctions and sales, and driving the price way up for the last 10 -
15 years.
According to local sources, outside participants have helped keep
land prices higher than the national average in central Illinois. An
influx of bidders and money from "other than farm" sources, many
from out-of-state have been participating in local land auctions and
sales.
Capital investment firms have been buying up central Illinois farm
ground at auction because it maintains its value in an economy where
stocks and bonds may not hold their value, and because it returns
approximately 2-3% on investment. Adding farm ground to their
clients' mutual fund portfolios provides stable, concrete diversity
even in the midst of troubled economic times. These investment firms
have been bidding the price up and providing competition for local
buyers.
It is widely reported that another entity competing at auctions for
central Illinois farm ground is the Mormon church. The Mormon church
is reported to have extensive land holdings in 24 states in the
United States, much of it in Florida and Missouri, but is quite
active purchasing ground in central Illinois. Because it is a
religious organization, the Mormon church does not have to disclose
any information about its property holdings, so the extent of its
holdings can only be guessed at.
In addition to not having to disclose their holdings, the Mormon
church does not have to pay any taxes on the properties or the
income it derives from those properties, and so every acre of ground
that it buys here in central Illinois is removed from the counties'
important source of income, property taxes.
Both of these entities,
capital investment firms and the Mormon church, show up at larger
acreage auctions and compete with local land-buyers, driving prices
up. Their aim is to drive the prices up so that their land
investment-holdings maintain a high value. So, since these
out-of-state buyers show up to bid on larger tract auctions, larger
acreage sales tend to bring a higher price than smaller acreage
sales.
[to top of second column] |
Competing right alongside
these out-of-state buyers are larger local producers who are looking
to increase their production acreage. While the out-of-state buyers
purchase these plots to put them up as cash rent ground, the local
producers are buying the ground to keep it out of the hands of the
investment firms and the religious groups and farm it themselves.
For the local producers, it is better to purchase more ground and
keep their income protected from excess taxation. Neither the local
buyers nor the out-of-state buyers seem to be taking acreage out of
agricultural production.
On the downside, bidding the price up means that a whole new
generation of farmers is likely being prohibited from entering the
profession because they cannot afford the startup cost to purchase
sufficient farm ground. This means that for the most part only well
established farms with substantial existing acreage under production
are the only local entities likely to afford farms that go up for
sale. Additionally, the land purchased by a religious organization
means that local government loses an important source of property
tax income.
The key positive outcome of having out-of-state bidders propelling
the land price upward is that local farmers who have worked hard all
their lives and are now retiring or leaving farming are reaping very
good prices for the land that they put up for sale. Larger farms
that buy that ground shelter money from taxes, and their balance
sheets look good to banks and credit agencies.
References:
Investment Firms Find Value in Farmland
A way to match billionaires buying up our farmland
Farmland Partners Inc. is
an internally managed, publicly traded (NYSE: FPI) real estate
company that owns and seeks to acquire high-quality farmland
throughout North America addressing the global demand for food,
feed, fiber and fuel
Foreign Investors Are Snapping Up US Farms
|
