ILLINOIS
•Cropland average per acre:
$4,460
•Cash rent per acre:
$141
Prime Illinois farmland rose 20% in 2007, continuing a trend that started back
in 1986.
"I've been saying 'farmland is worth what it earns' for 35 years now," says Dale
Aupperle. "It's a simple way of explaining that net income drives land values."
Aupperle owns Heartland Ag Group, a professional farm management and real estate
company based in Decatur. He says good farmland is selling for between $6,500
and $7,000 an acre, with the occasional "spirited" sale pushing prices past that
mark.
And he doesn't think prices have maxed out. Aupperle says he expects another
double-digit increase in land prices this year.
"I'm looking at historical average returns, and they are 4%. That means we're in
a normal earnings environment. You have to look at what earnings are as a
percentage of land value to see that these prices are not as wild as you might
think."
One caveat: A recession in the U.S. or abroad could take the wind out of the
market. Aupperle says he's also concerned that lower interest rates will ramp up
inflation.
Another factor in higher land prices is scarcity on the supply side.
"There is less land for sale at any price now than in previous years," Aupperle
says. "I've had several sellers decide to pull back because they were concerned
about where they could reinvest the money. That has led to a little plateau in
activity through the first part of 2008."
Aupperle adds that today the average-size farm in Illinois—80 to 120 acres—is
worth at least a half-million dollars.
"It's hard to imagine an 80-acre tract of land worth a half-million dollars, but
that's where we are today."
MISSISSIPPI
•Cropland average per acre:
$1,810
•Cash rent per acre:
$73
A piece of loamy cotton ground used to be as good as it got here price-wise. But
today's high grain prices are pushing up values on Mississippi's heavier dirts
too, says Elliott Fancher, an appraiser with the Land Bank in Greenwood.
An acre of farmland with water capability and strong soils can bring $2,500 to
$3,000 an acre, Fancher says. Grain acreage, with water capability, will be in
the $1,600- to $1,700-per-acre range. Recreational land is very hot, especially
if it's within driving reach of an urban area.
"There's a range in that. If there's timber on it, you can see hunting tracts
being sold at $1,700 to $2,000 an acre," he says. "If the land is cut over with
no trees, it will be around $1,200 to $1,300 an acre."
Fancher says there's a lot of investment money in the state's land market now,
especially closer to the coast, but availability in farming areas is tight.
"If you're talking farmland, there's just not much available. And if it is,
money talks. Anyone wanting to buy good farmland has to be willing to pay for
it."
ARIZONA
•Cropland average per acre:
$10,800
•Cash rent per acre:
$170
Landowners here have found themselves at the mercy of the declining residential
market. Developers are no longer buying urban fringe farmland, which means no
1031 money to reinvest in the more rural areas.
Thomas Schorr, an appraiser who watches land values for Farm Credit Services
Southwest, says sellers who did not sell when 1031 activity was at its
highest—2005 and 2006—are unwilling to lower prices now. Buyers, on the other
hand, are unwilling to pay prices they consider too high.
"So basically there is a gap in the market right now," says Schorr. "That's
created this lull in activity that may take as much as 24 months to work
through."
Prices for farmland in Arizona are all over the board. Schorr says they can be
as low as $3,500 in very rural areas under center pivots, to as much as $25,000
for vegetable ground in the Yuma area.
*Land prices/cash rents not attributed to a source are from the USDA's most
recent summary.