Land Market and Lease
Trends in Illinois
Illinois Land Values Conference
March 16, 2006
Morris Illinois
Results of Membership Survey on:
Farmland Buyers and Sellers
& Lease trends
Estate sales dominate sellers
Sellers of Farmland, Illinois, 2005.
Active farmers
11
Retired farmers
22
Estate sales
43
6
Institutions
17
Individuals
1
Others
0
10
20
30
Percent
40
50
Settle estates main reason
for selling farmland
Reasons for Selling Farmland, Illinois, 2005.
Settle estate
42
Need cash
7
Forced liquidation
4
Received a good price
37
Re-orient investment
4
Close-out undivided interest
5
Other
1
0
10
20
30
Percent
40
50
Investors remain main buyers
Type of Farmland Buyers, Illinois, 2005.
31
Local farmers
Relocating farmers
10
36
Non-local investors
Local investors
10
Institutions
1
Recreational buyers
10
Other
2
0
10
20
Percent
30
40
Buyer Attributes include that…
• 56% of buyers use 1031 exchange funds
• 62% of buyers did not need debt capital
1031 Buyers driving market
Reasons for 2005 Farmland Price Increase, Illinois.
Other
0.1
Government support programs
1.1
High corn and soybean yields
1.6
Large number of non-1031 buyers
2.6
Low interest rates
3.6
Limited supply of farmland
4.1
Large number of 1031 buyers
7.9
0
2
4
6
Score
8
10
Chicago is the “Gorilla”
Location of 1031 Buyers, Illinois, 2005.
Chicago Area
57%
St Louis
7%
Other Illinois
Area
6%
Outside
Illinois
6%
Local Area
24%
Price Increase Expected in ‘06
Expected Change in Farmland Price During 2006, Illinois.
Increase more than 10%
2
Increase between 6 and 10%
15
Increase between 0 and 5%
61
17
Decrease between 0 and 5%
4
Decrease between 6 and 10%
1
Decrease more than 10%
0
10
20
30
40
50
Percent of Respondents
60
70
Stable Trend expected for 2007
Expected Change in Farmland Price During 2007, Illinois.
Increase more than 10%
2
Increase between 6 and 10%
4
Increase between 0 and 5%
61
Decrease between 0 and 5%
31
Decrease between 6 and 10%
Decrease more than 10%
2
0
0
10
20
30
40
50
Percent of Respondents
60
70
Cash rent and custom farming have
higher returns
Table 1. Per Acre Farm Incomes that Landlords Receive
for Different Lease Types and Land Qualities, 2005.
Lease type
Excellent
Land Quality
Good
Average
Fair
Traditional crop share
------------------ $ per acre --------------------120
110
95
78
Cash rent
150
135
120
103
Custom farming
160
145
130
100
High end returns and variability
Table 2. Per Acre Cash Rents for Top 1/3, Mid 1/3, and Low 1/3
Cash Rent Leases by Land Quality, 2005.
Lease type
Excellent
Land Quality
Good
Average
Fair
High 1/3
----------------- $ per acre ---------------------190
175
150
125
Mid 1/3
170
150
130
110
Low 1/3
150
130
110
90
Cash rents continue to increase
Types of Leases in 2006.
1
Other
6
Custom farming
45
Cash rent
Modified crop share (other than supplemental
rent)
5
7
Modified crop share with supplemental rent
36
Traditional crop share
0
10
20
30
Percent
40
50
Growth seen in amount
of cash rent leases
T ypes of Leases Projected in 2006 and 2010.
Other
Year
2006
2010
Custom farming
Cash rent
Modified crop share (other than
supplemental rent)
Modified crop share with supplemental rent
Traditional crop share
0
10
20
30
40
Percent
50
60
70
Competition leads to increases
Table 3. Reasons Cash Rents are Increasing.
Change
Increase in farmland prices
Competition among farmers
Strong Returns to farmland
Large government payments
Score *
3.0
8.6
3.1
0.2