Soaring Land Market

October 12, 2021

The word “unprecedented” is overdone these days, but that description can easily be used to describe the land market here in the latter half of 2021. Fueled by a variety of catalysts, record-breaking sales have transpired in Morgan, Greene and surrounding counties. A Morgan County farmland auction we conducted on September 30 garnered an outstanding $16,900 per acre in the traditional in-person bidding forum. The last time we saw prices like this was in the run up of the market in the 2010-2014 window. What makes this recent rise so astounding is the pace at which it has taken place.

One of the ag-industry efforts I am involved in is the Illinois Society of Farm Managers and Rural Appraisers. Part of my responsibilities with that organization is to help lead the statewide effort of gathering and presenting land market data and expectations from fellow ag professionals. In early September at the Farm Progress Show, I presented the mid-year survey findings to the agricultural press. Ag professionals across the state determined that we had seen a 20% jump in land values across the state in the first half of 2021. That is only the fourth time in the 51 years since the organization began presenting this data that such a substantial jump has occurred.

Often when we see a leap of this magnitude, a lot of energy is spent looking for the silver bullet that led to the surge. I believe that there isn’t a singular factor taking us on this wild ride, but rather a combination of occurrences.

The first is good ole fashioned supply and demand. Year-end 2020 data indicates land transactions were down dramatically across many regions in Illinois throughout the year. While the world shut down in many respects, the land market slowed, as well. Fall 2020 did not generate the transactions we had grown accustomed to seeing.

The second is that interest rates remain near a historical low. The ability to borrow is alive and well. That has continued to be advantageous for buyers of all types – from veteran buyers to those for whom it is their first foray into land.

The commodities markets also saw an unusual spike late last year that strengthened corn and bean prices during a time of year when weakening is more typical. This has led to a much stronger grain market in 2021 than we ever could have expected a year ago. Land values have always responded favorably to increased prices on the grains the land produces.

Historically speaking, land has always been a good hedge against inflation and a “safe haven” during uncertain times. We are eighteen months into this pandemic and it is safe to say that “uncertainty” and fear of inflation are real factors in this momentum.

There is a lot going for the land market right now. I anticipate this wave will ride into the first half of 2022. We will be monitoring things closely as more and more sales take place this fall and winter. Right now, there have been just enough sales to clearly see the rise and I am not sure we have defined the ceiling yet. My hope is that when we do find that ceiling, we settle in and don’t go ricocheting back downwards. A slow and steady decline like we saw 2015-2019 would be the most palatable. For now, we ride this roller coaster and see where it takes us.

Written by Luke Worrell – Managing Broker, Accredited Land Consultant, Accredited Farm Manager