Farmland values continue strong in Illinois

Posted: December 16, 2020

Farmland values remain resilient and actually edged higher across the heart of the Corn Belt in the third quarter.

The Federal Reserve Bank of Chicago reported farmland values in its district increased 2% during the most recent quarter compared to the same time last year.

Chicago’s Seventh Federal Reserve District stretches across all or most of Illinois, Indiana, Iowa, Michigan and Wisconsin.

“The District had not seen this large of a year-over-year increase in its farmland values during the past six years,” the Chicago District noted in its Agricultural Newsletter.

Indiana and Wisconsin experienced the largest jumps in farmland values of 6% and 3%, respectively, the past quarter while values increased by 2% in Illinois and 1% in Iowa.

After being rocked the first half of the year by low commodity prices and issues caused by the coronavirus pandemic, the ag sector rebounded and maintained support for the farmland market through rising commodity prices, low interest rates and additional government payments.

USDA projects net farm income this year could increase $19 billion (22.7%) to $102 billion compared to last year. If realized, net farm income would be 25.4% below the 2013 peak, but 13.8% above the 2000-19 average.

“The value of the crops are up dramatically,” said Steve Elmore, chief economist with Corteva Agriscience. “That’s why we have good farm income.”

Average prices increased 9.3% for corn and 6.7% for soybeans from August to September, the Chicago Fed reported, and recently pushed to new heights.

Meanwhile, direct government payments to the farm sector could total $37.2 billion this year, up $14.7 billion due to supplemental and ad hoc disaster assistance for COVID-19 relief.

“When you think about this next year and the new administration, it could be hard to get any more money for agriculture,” Elmore cautioned.

Some balance sheets could tighten as USDA forecasts farm debt to rise by $15.2 billion to $433.9 billion, led by a 5.5% rise in real estate debt.

The debt to asset ratio is forecast to rise from 13.61 in 2019 to 13.95 this year.

“We’re lucky interest rates are down,” Elmore said. “Farm debt has continued to go up as farmers refinance to try to get their houses in order.”

The Chicago Fed reported the repayment rates on non-real estate farm loans declined from July through September compared to the same time last year. Loan renewals and extensions increased during the same period.

Looking ahead, Elmore believes interest rates will remain historically low, which should continue to support agricultural land values.

Source: Illinois Farm Bureau

2020 Farm Projections

The USDA-ERS recently reported a much improved farm income and financial forecast for 2020.

Net cash farm income for grain farms is forecasted to have risen between 32% to 41% in 2020 compared to 2019.

U.S. hog farms are forecast to realize a nearly 12% gain in net cash farm income in 2020 while cattle/calf farms are forecast to gain 40.6% in net cash farm income this year. The Corn Belt region average net cash farm income is forecast to be 27% higher in 2020 compared to 2019, which reflects a portion of the 104.5% increase in government payments across the U.S. farm economy as a whole, as well as the 2.7% decline in total U.S. farm production expenses.