OSWEGO, ILL. (RFD NEWS) — Several factors are influencing farmland values today, including soil quality, drainage, location, grain prices, and demand from farmers and investors.
Ray Brownfield with the American Society of Farm Managers and Rural Appraisers (ASFMRA) joined us on Wednesday’s Market Day Report to discuss current farmland market dynamics in Illinois and the factors driving land values in the region.
In his interview with RFD News, Brownfield discussed the importance of drainage, particularly in Illinois, noting that poor drainage can reduce income and, in turn, lower land value.
“Here in Illinois, particularly drainage really is probably the main factor,” Brownfield said. “If it doesn’t drain, it doesn’t produce.”
Brownfield said Class A soils with productivity indexes from 133 to 147 continue to command strong valuations because of their high production potential.
Medium soils with productivity indexes from 117 to 132 can also perform well with today’s genetics, he said. But soil quality is only one part of the equation. He said location can create significant differences in value between farms with similar soils and productivity.
“You can find two farms of the same PI all that within each township and one will do better than the other because it’s a locational issue,” he said.
He added that areas with less land available for sale can also see higher values because of limited supply.
Farmers Remain Key Ag Land Buyers
Brownfield said farmers remain the largest group of farmland buyers.
“Fifty-five percent of all the sales out today are farmers buying,” he said.
Farmers often want land next to their existing operations, particularly because it may not become available again for many years.
Brownfield said another 8-10 percent of farmland buyers fall into categories such as institutional funds and other investors looking at land as a long-term investment.
He said investors may view farmland as an opportunity to diversify their portfolios.
Farmland as a Long-Term Investment
Brownfield said farmland has appreciated steadily over time, citing an increase of approximately 40% over the past six years, or about 7% per year.
He said farmland values have already increased about 3.5 percent this year, although he believes some areas are seeing greater gains.
Brownfield also pointed to recent sales of high-quality Class A farmland at approximately $18,000 to $22,000 per acre.
He said grain prices and expectations for future grain prices can also influence land values.
“Farmland, good investment, tremendous investment,” Brownfield said.
He acknowledged his perspective is influenced by more than 60 years in the business, but said farmland remains attractive as a long-term investment because of its limited supply.
Current Farmland Market Dynamics
Brownfield said recent auctions demonstrate continued strength in the Illinois farmland market, particularly for high-producing ground.
With farmers accounting for most sales and investors continuing to view farmland as a long-term asset, demand remains an important factor supporting values.
For producers looking at farmland, Brownfield said the availability of high-quality ground can be a significant consideration because the opportunity to purchase a particular parcel may not come around again for many years.
LEARN MORE: www.asfmra.org
