Hickory Point Ag's Bruce Huber is approaching this land market with "cautious optimism."
During the Farm Progress Show, Huber, president of the Illinois Society of Professional Farm Managers, presented a mid-year snapshot of the Illinois land market, along with the University of Illinois' Gary Schnitkey and Heartland Ag Group's Dale Aupperle. Aupperle notes land has gained an unprecedented 65% in value over the past three years. Today, prime Illinois farm land is selling for an average of $13,200.
Still, there ISPFM members seem to expect a bit of softening in the land market. According to the mid-year survey, 45% of ISPFM members expect land prices to decrease. Yet, 46% expect values to increase 1%-5% over the next five years, while 9% expect values to remain unchanged.
Schnitkey presented the cash rent component of the survey. ISPFM members expect small decreases in cash rent for the 2014 crop season.
Cash rents averaged $388 an acre for excellent quality farm land. Schnitkey notes the survey indicated an expected drop to $374/acre for the coming year.
Lastly, respondents look for corn prices to fall to an average of $4.90 for the coming year. Over they next five years, they expect corn will average $4.75/bushel.
So, is a 1980s-type decline on the way? Only 17% of respondents think there's a 10%-50% chance that a 1980s-style decline is on the way.
Looking at economic drivers for farm land values, the survey indicates a stall in the Chinese economy or a loss of the Renewable Fuels Mandate would have the greatest chance of causing a significant downward trend in values.
Conversely, a 5% growth in the U.S. economy or a 10% increase in inflation would have a positive effect on land values. ISPFM members expect the Farm Bill will have no effect on land values.