What is in this article?:
- Price of farmland still gaining ground
- No price dive expected
- Farmland prices have not fallen during the recent troubled economic times.
- USDA indicated that prices of farmland per acre were relatively stable between 2008 and 2010: $4,850 in 2008, $4,670 in 2009, and $4,820 in 2010.
- The last time farmland prices declined was during the agricultural financial crisis of the mid-1980s. During this crisis, average farmland prices decreased from $2,023 per acre in 1981 to $1,149 per acre in 1987, a decline of 43 percent over a five-year period.
No price dive expected
Schnitkey said he doesn't expect the price of farmland to dive any time soon.
"If we look at where cash rents are on farmland and where interest rates are, farmland prices in Illinois appear to be reasonable and in line with historical relationships.
"We would expect that if we have stable interest rates, cash rent as percent of land prices should stay roughly the same. But interest rates have declined and reached historically low levels recently. As an example, the interest rates on key treasury notes in 10 years have gone from 14 percent in 1982 down to below 4 percent recently."
According to Schnitkey, the future looks stable.
"We think that the recent increase in commodity prices is going to hold farmland prices stable, and a 2 to 3 percent increase in land prices would be consistent with what we're seeing in cash rent. So, we're looking at stable to increasing land prices over the next several years.
"If I were concerned about land prices in the future, interest rate increases would be the factor that would have the largest impact. Sometime in the future we're likely to see interest rate increases, and that could have a negative impact on land prices."
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Since its inception over a decade ago, the website has delivered unbiased and timely economic information to agricultural producers and businesses.
For more information, contact Gary Schnitkey at 217-244-9595 or via email at email@example.com.