Farmland prices dip, but don’t break

By Charlyn Fargo

My father always told me one of the best investments you can make is in good, black, Illinois farmland, even if you’re not a farmer yourself.

Back when I was a kid, he bought some farmland for $3,000 an acre and his neighbors thought he was crazy. That looks like a real good buy now. Good, Ipava central Illinois farmland hit a high of $12,000 to $15,000 an acre not all that long ago. And while it’s dropped some – and forecast to perhaps drop a bit more, farmland remains a good investment.

The main reason is what my father told me – they don’t make any more of it.

At the recent Farm Assets Conference in Bloomington, an ag economist predicted Illinois farmland prices may continue to soften, but not drop in prices like the 1980s.

Illinois farmland values have softened in 2015, but nothing like the brutal declines seen during the 1980s,”, said University of Illinois ag economist Bruce Sherrick. “I’ve had a lot of calls, a lot of concerns about what is happening to the farmland market itself.”

Sherrick said farmland values have remained resilient so far compared with the 1980s, because farmland purchases by farmers today are not as leveraged as those made in the 1980’s.

One of the most astounding things is how little movement in farmland prices there has actually been,” said Sherrick. “We have seen a softening, but part of that is the failure of farmland to continue to go up at the rate it had been. That was interpreted as a reduction in value.”

Although Illinois farmland values were largely stable in the third quarter of 2015, a majority of bankers surveyed by the Chicago Federal Reserve Bank project a fourth-quarter drop — 52 percent of the survey respondents anticipated a decrease in farmland values in the final quarter of 2015, while only 1 percent anticipated an increase.

One key factor keeping regional farmland values from sliding in the third quarter of 2015 was the stability of corn prices, the Chicago Federal Reserve said.

Neighboring Iowa has seen a greater drop in farmland prices – close to 10 percent in some areas, according to Sherrick, but at the same time, in certain areas, there has been an increase in Iowa farmland.

Like Dad always said, the price of farmland sometimes depends on how many neighbors want it. For me, I still believe farmland remains a great investment.

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