Volatility and Its Projected Impact on 2021 Land Values

January 29, 2021

2020 was a year that had many in the Agriculture community scratching our heads. As farmers and landowners, we experienced the good, the bad, and the ugly at various points during the year. The COVID-19 disruption hit us with low commodity prices. China stepped in and started purchasing US-based commodities which put grains in the position of being a demand-driven market instead of a supply market. And so on.

As the new year has rolled in, volatility remains and a new set of challenges face farmers including: Marketing grain in a highly-volatile commodity market, developing pricing plans for inputs, working around new and constantly-changing government programs, and building cashflow projections amidst unpredictability.

With many of us looking into the 2021 growing season with optimism, it is important to keep in mind that we are likely to witness highs and lows once again this year. It is imperative to work with your retailers, lenders, marketers, and those within your own organization to come up with a game plan.

This scenario leads to an interesting question regarding land values in 2021. The sharp rise in commodities has allowed for renewed strength in land values. Certain regions throughout Illinois and neighboring states experienced strong sales toward the end of 2020. That trend has continued thus far into 2021. There is more optimism for land values than we have seen for several years.

In August 2020, the Illinois Society of Farm Managers and Rural Appraisers released its Midyear Survey which is comprised of responses from professional farm managers and appraisers throughout the state of Illinois. At that point in the year, even before the huge commodity rally, 73% of respondents predicted a stable to actively-increasing land market. Next month, when the same organization releases its annual Farmland Values and Lease Trends report, I expect to see land values on the rise across the state, especially for all-tillable acreage. The next couple months will play a large role in establishing current market values as transactions take place before planting season.

Historically, when there is a lot of volatility and unknowns in macroeconomics, land values benefit from the fact that land is viewed as a tangible and comparatively “safe” asset class. All of this to say, the road may be bumpy, but farmland continues to be a great investment and is likely to increase in value throughout 2021.

About the Author: Adam Bauer joined our team in 2018 as a Land Broker, focusing primarily on land real estate in Schuyler, Brown, McDonough, and Fulton Counties. Adam is a fifth-generation farmer and Schuyler-county native who was raised on a Central Illinois farm, working alongside his family to this day raising corn, soybeans, and livestock. Adam has spent his entire life immersed in agriculture, and has invested in a wide variety of education that’s developed a well-rounded knowledge of the “business side” of agriculture. He and our Appraiser Trainee, Bill Pherigo, also own My Farm Business, LLC which works with farmers on growth model strategies, debt management strategies, large-scale grain marketing, and crop insurance. Learn more about Adam at www.Worrell-LandServices.com/Adam-Bauer.