Spring numbers show sharp increase in Illinois farmland prices

[October 15, 2021]  By Zeta Cross

(The Center Square) – In the first half of 2021, analysts say Illinois farmland prices did something atypical: they shot up in value.

A survey of members of the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFMRA) done in August showed a 20% increase in the price of Illinois farmland in the first half of 2021. This is only the fourth time in the past 50 years that farmland prices have increased so significantly.

“Right now all of the elements of buying farmland simply look better than they used to. But they have always looked good,” said Mike Doherty, senior economist and policy analyst of the Illinois Farm Bureau.

Because of historically low interest rates, Doherty said property all across the country has gone up in value.

“It’s not just farmland. All land, all property, is going up,” Doherty said. “This is an unusually rapid increase in farmland prices that mimics, or is in line with unusually rapid increases in property values across the U.S.”

Signs of inflation kicking in is another reason that investors are pushing the price of farmland up, Doherty said.

“Inflation has always been the friend of farmland prices,” he said.

As an investment class, farmland is considered very steady….with a steady trajectory. It doesn’t go up and down rapidly in value – compared to other assets.

“People are interested in buying farmland because they are afraid that inflation could reduce the value of holding money in other forms,” Doherty said.
 

ISPFMRA will break down the numbers and present a deeper dive into the data on farm prices at their annual meeting next March.

“We want to see if this is sustained and what kind of land classes we are talking about,” Doherty said.

This summer the Chicago Federal Reserve Bank, which surveys 150 rural bankers, reported a price increase in the value of northern Illinois grain-producing farmland, Doherty said.

“In the second quarter, their survey showed that farmland in that very strong agricultural area of Illinois increased by 14% year-over-year,” he said. “I’ll be looking for future Chicago Federal Reserve Bank Reports to see what they say.”