Down the Homestretch of 2020

October 1, 2020

With 2020 being chaotic on so many levels, one might expect that has resulted in drastic and sudden swings with land values, leases, and other popular talking points in Agriculture. So, let’s take a quick look at some of these always-relevant topics. Like usual, a brief article does not adequately do justice to the complexities of Agriculture, so please don’t hesitate to follow up to discuss any of this in greater detail.

Land Values
Freshly accumulated land values data was recently released from the University of Illinois and the Illinois Society of Farm Manager and Rural Appraisers. This “Mid-Year Survey” is comprised of data from professional farm managers and appraisers throughout the state of Illinois, reflecting actual land sales year-to-date. Despite 2020 being off the rails, the data was encouraging and revealed firmness in land values throughout West Central Illinois. If you take a step back, this isn’t as surprising as you might think. Historically speaking, when the economy is volatile or unknown (Hello 2020!), tangible assets such as land can experience strength.

Even in the midst of a global pandemic, “High Quality” of “Class A” farmland in our region saw no change whatsoever from where we entered the year. On “Good” or “Class B” acreage, only a fractional decrease of around 2% has been recorded year-to-date. “Average” or “Class C” land saw a decrease of only 1%. To me, the fact that we have weathered the rough seas and have largely maintained value is a blessing and something to feel good about. Not enough relevant data was provided for the Mid-Year Survey to get a clear read on “Recreational Land.” While I do not anticipate a significant market correction, analyzing the year-end data will be interesting as this classification of land is usually tied to discretionary income. (Note: A recording of the webinar that revealed this data is available on our website should you wish to learn more.)

Rents & Overall Farm Income
The impact on rents and overall farm income remains largely to be seen since we still have a crop in the field as I type this. However, I do expect a very solid year of production and anticipate, at a minimum, recent averages on yields. Commodity prices spent a bulk of the early COVID-19 era falling below levels we had seen in some time. Thankfully, the market has shown some redeeming qualities over the last 4-8 weeks, now reflecting yearly highs in the soybean market. The condensed recap is that prices and farm income aren’t where we want it to be (one could argue it never is!), but we are in an exceedingly better position than we ever dreamed possible early this summer. This has led to leases being steady with most ag professionals not anticipating any major increases or decreases.

The Election & Agriculture
Did you hear there is a presidential election this year? Every four years I get questions regarding the upcoming election and its impact on agriculture. There is too much noise and negativity, and I would love to avoid that in our newsletter. So I won’t dive headfirst into the murky political waters in which we swim! I will say this. In my time in the industry, we have had Presidents and Administrations from both sides of the aisle. The one constant has been a marked level of uncertainty.

While I lived through the 80s and 90s, I didn’t do so professionally. I certainly grew up on the stories surrounding Ag during that time and you guessed it, the common theme was…uncertainty. I was incredibly close with my late Grandpa who farmed from the 40s to the 90s and I remembering being captivated by the stories he told about all the “great unknowns” of the future of Agriculture. I say all of this to hopefully illustrate that it seems uncertainty has always been one of the guarantees with Ag. Regardless of whether the November winner has a “R” or “D” next to his name, we will largely have the same hurdles to jump, the same number of question marks, and the same work ethic and wherewithal to see ourselves through as a nation.

I chose this title because it gives me a small feeling of optimism as we hopefully welcome smoother sailing ahead in 2021. If any of you have spent time working with the Ennegram, I am a “7” so that explains my perpetually positive state-of-mind. The end of 2020 will be noisy, but I am eager and ready to tackle the opportunities 2021 will provide in agriculture.

Written by Luke Worrell – Managing Broker, ALC, AFM