Low Returns, Crop Prices Keeping Pressure on Farmland Values



(Boone, IA, August 31, 2016) – Illinois farmland values continued their pullback around the state during the first half of 2016 as prices retraced between an estimated 3.3 percent and 7 percent. Continued low net returns and softening commodity prices are cited as the primary cause of the decrease. This is according to the Mid-Year “Snapshot Survey” information gathered by the Illinois Society of Professional Farm Managers and Rural Appraisers as well as the Illinois Farm and Land Chapter of the REALTORS® Land Institute (RLI). The data analysis is provided by Gary Schnitkey, Ph.D., with the University of Illinois College of ACES. The survey is part of an ongoing and larger annual Land Values and Lease Trends project conducted by the Society.

The survey results were released today at the Farm Progress Show being held in Boone, IA.

According to the survey, below $4 per bushel prices paid for corn are expected to continue into 2017 with some decreases in production costs expected. Cash rents paid are also expected to drop about $20 per acre.

Farmland Values and Volumes
Survey respondents indicated that land values decreased 3.3 percent for Excellent-quality farmland; decreased 4.5 percent for Good-quality land; 5.6 percent of Average-quality land; and dropped 7.0 percent for Fair- quality land.

(In a normal year, Excellent- quality farmland averages over 190 bushels of corn per acre, Good- quality farmland averages between 170 and 190 bushels per acre, Average- quality farmland averages between 150 and 170 bushels per acre, and Fair- quality farmland averages below 150 bushels per acre. )

Respondents estimated prices paid for Excellent-quality farmland during the first half of 2016 averaged $11,100 per acre; $9,400 for Good land; $7,600 for Average-quality land; and $5,800 for Fair-quality farmland. Sixty three percent of those responding to the survey reported that less farmland was sold during the year and 85 percent expect the same amount of land, or less, to be available for sale in 2017. Typical buyers (64 percent) continue to be other farmers and there are no expectations of significant changes in this.

Respondents indicate they are split on whether there will be the same or more demand for land with 48 percent expecting there will be some decreases in demand and 51 percent anticipating no change or a very slight increase.

Price Expectations
Overall, respondents are more pessimistic about prices at midyear this year compared to recent surveys with a full 90 percent expecting some further decreases in values ranging from 1 percent to 10 percent. Corresponding decreases on per-acre-return are also forecast with 49 percent expecting a drop between $25 and $50 per acre and 16 percent predicting decreases of more than $50 per acre. A mere 2 percent expect returns to increase and then only very modestly.

Cash Rents
While a full 93 percent expect corn yields to be above average they expect the price for corn to be around $3.45 per bushel. A full two-thirds of respondents expect a ‘slight’ decrease in production costs. All of this leads to expectations that cash rents will continue their decline along the lines of land productivity.

Expected rents for 2017 for Excellent- and Good-quality land are expected to decrease by 7 percent; 9 percent for Average land; and 6 percent for Fair farmland.





Currently the most popular type of lease arrangement is for Cash Rent (32 percent) followed by Share Rent (29 percent), Variable Cash Rent (20 percent), Modified Share Rent (12 percent) and Custom Farming (7 percent). Respondents indicate Share Rent leases and Fixed Cash Rents will decrease in use while Variable Cash Rents will become more popular.

The ISPFMRA will be conducting its annual Land Values and Lease Trends Survey over the upcoming winter months. The results of this larger survey will be released at the 2017 Illinois Land Values Conference set for March 23, 2017 at the DoubleTree by Hilton in Bloomington, IL.

Illinois State Fair Sale of Champions

Illinois Governor Bruce Rauner purchased the Grand Champion Steer at the Illinois State for a record setting $104,000.

Governor Rauner Announces Illinois State Fair Foundation

The Illinois State Fair has a new funding source. Governor Bruce Rauner has announced the creation of the Illinois State Fair Foundation. He says it is a non-governmental, non-political, privately run 501c3 Not-for-Profit to be operated by farmers and community leaders.

The private foundation was created after the Illinois State government failed to pass legislation last year to create a similar board. The private foundation will work to restore and maintain the Illinois State Fair in Springfield, and the DuQuoin State Fair in the southern part of the state.

You may follow the progress of the Pro Farmer Midwest Crop Tour August 22-25 on WILLAg.org. Watch for live in field results from the tour scouts as they gather information from corn and soybean field across the Midwest. The updates will come directly from a series of crop scouts. Monday through Thursday we'll also bring you audio updates from Pro Farmer's Brian Grete and Chip Flory. Those updates will air during the 2:06-2:36pm Closing Market Report. Friday Brian Grete will join the Commodity Week panel to review the tour results, Pro Farmer's official estimation of the 2016 crop, and compare those to USDA's August report. You may learn more about the tour on the Pro Farmer website.

2016 Illinois Corn & Soybean at Mid-Season with Emerson Nafziger

Urbana - University of Illinois Extension Agronomist Emerson Nafziger discusses the potential of the corn and soybean crops at mid-season.

PLAYLIST

  • Corn (tipback)
  • Soybean (tall)
  • Growing Degree Days (frost)

IPPA Responds to Chicago Tribune "The Price of Pork" Series

Chicago Tribune “The Price of Pork”
Jennifer Tirey, Executive Director - Illinois Pork Producers Association

New Site for August 18th U of I Agronomy Day

Agronomy Day on the University of Illinois campus is Thursday August 18th.

Agronomy Day at ILLINOIS has moved this year. It’ll be a bit further south of campus at the new facilities on the First Street farm says University of Illinois Extension Weed Scientist Aaron Hager.

The south First Street facility is about 3 miles or so from the usual place, however, it is in a different city on the map. The address is Savoy. Just go straight south from the U of I’s football and basketball arena’s on First Street and you’ll find the farm on the east side of the road. The doors open at 7am Thursday August 18th, with a meal at the noon hour.

Marketing a Low Priced High Volume Corn Crop

The price of corn is predicted to stay low this coming year because the size of the crop should be really big. Todd Gleason has more on just how a farmer might go about marketing under such conditions.

The numbers aren’t pretty as it relates to this year’s corn crop, at least other than the number of bushels in the bin. It should be a great big one, something on the order of 15 billion bushels thinks Darrel Good. Each of those bushels will be worth a lot less than they would have been earlier in the year and now farmers must figure out how to make a lower price and a higher yield result in a sustainable income. The price is too low to call it anything more than sustainable and the crop is too big to put it all in storage says the University of Illinois agricultural economist.

Quote Summary - So, some sales must be made between now and the end of the harvest period. Getting the extra bushels sold in the next few weeks is probably a good idea as pressure continue on futures and basis through harvest. So, if you are looking at an extra 20 to 30 bushels to the acre that you normally do not have, then you should get that priced and out of the way. However, storing the crop is the decision of choice, and the one I would choose at this point. The dilemma is that it may require a fairly long storage period to see a price recovery.

It won’t be quick or even large says Darrel Good, but a recovery should come as the days pass in 2017 and the trade looks forward to the next crop year. Storing corn on the farm and waiting for a higher price is a simple enough decision. Storing it at the grain elevator is a much tougher prospect.

Quote Summary - You’ll spend about 30 cents a bushel to hold corn to next spring. Right now the carry in the market is about that. If you look at harvest time bids plus spring basis there is about a 30 cent carry in the market and this makes commercial storage a breakeven operation at this point other than just holding for higher futures prices. Still, there is likely to be an opportunity to payoff on that, but it will take a much higher price recovery to pay for off-farm storage costs than is the case for on-farm.

You may read more about marketing corn from Darrel Good on the Farm Doc Daily website. A new article on commodity marketing is posted each Monday afternoon.

Control Mosquito Larvae & Protect Yourself

Foggers used by cities and towns can be a pretty effective tool for controlling mosquitos. They can even be used around the house. It is best, however, to start with the basics. Both types of disease carrying mosquitos need standing water to hatch. Get rid of it, especially if it is nasty water says University of Illinois Extension Entomologist Phil Nixon.

Quote Summary - Those mosquitos are quiet biters, they will sneak up and bite you. They are the ones in the case of the northern house mosquito, transmitting west nile virus and in the case of the Asian tiger mosquito Zika virus, if it gets established this coming summer. Both of these mosquitos tend to be short range flyers, usually a quarter to half a mile, and so what you do on your own property and what your neighbors do can make a huge difference in the numbers of these mosquitos and the likelyhood of being bitten.

The first line of defense says Phil Nixon, and the Centers for Disease Control, is to protect your own person and your family. Use an EPA-registered insect repellant. Clean out your gutters and get rid of standing water. If you want to go further, in the case of a backyard get together for instance, even in the Midwest where Zika carrying mosquitos are unlikely to appear, call in bigger guns like Daren Bohannan. He owns a Mosquito Squad franchise.

Quote Summary - So, when we are treating your yard here in the Midwest, we are probably not killing any of the aegypti, but there are some other mosquitos that carry other diseases like West Nile and heart worm for your pets. So, I think more people are concerned in the local area here in central Illinois with just the nuisance of mosquitos.

Once final note on mosquitos. You heard Phil Nixon say the two disease carrying types sneak up on you. Those two types aren’t particularly noisy. So, less to worry about if you hear that mosquito buzzing by just before you feel its bite.