Farmland continues to be the Cinderella of the ball as recent prices topped $8,000 per acre over a 14-county region of Central Illinois, says Bruce Huber, Vice President, Hickory Point Bank, Decatur, Ill. Huber spoke about land trends to a group of farmers gathered Thursday at a seminar.
"High commodity prices, due to record demand for corn and soybeans, should result in high land rents, and, in turn, high land values," he says. "Farmland is now attracting investors ranging from farmers to large investment funds." He says 1031 exchange buyers are now a minority at sales. "One thing they all have in common is that most acquisitions are still predominantly cash," he adds.
Central Illinois farmland values have appreciated nearly 15% and returned 3 to 5% of value in rental income. Combined appreciation and income resulted in total returns of 16 to 20% in 2010, based on sales data.
According to sales just in the past four months, land prices are increasing at a rate of 4% per month. On Feb. 15, 134 acres in McLean County with a soil rating of 140.3 sold for $10,150 per acre. On Feb. 3, 80 acres in Christian County with a soil rating of 139 sold for $9,100 per acre. Both sales were at auction and both buyers were farmers.
Inflation appears to be a major concern of many investors, says Huber. "Gold has been receiving a lot of press due to the perceived inflationary hedge it provides," he says, noting that gold prices and Central Illinois farmland prices have risen in tandem in the past year. "Farmland can provide the safety of gold and, at the same time, provide an income stream," he adds.
Central Illinois farmland values 1938 to present