2022 Spring Farm Outlook

Page 20 Spring 2022 Logan County Farm Outlook LINCOLN DAILY NEWS March / April 2022 Spring 2022 Logan County Farm Outlook LINCOLN DAILY NEWS March / April 2022 Page 21 Land has been on an overall increase, from 1973 when acreage sold at around $1,000 an acre through a peak in the early 80’s that quickly fell off to a gradual climb into the early turn of the century. Land prices nearly doubled between 2007 and 2012, corrected down again until 2019, then began a steep climb over the last two years. Why does this happen? Applerle has a favorite saying “Farmland is what it earns.” He expounds saying, “It’s the underlying net income that has driven farmland higher over the years. That will continue to be the reason for increasing or decreasing land values. Right now commodity prices are exceptionally strong.” Commodities such as corn and soybeans are certainly on the rise. In the early part of March corn sat at $7.60 per bushel and soybeans at nearly $17 per bushel. Even so, the gross income for the sale of the harvest is not going to touch the price of the farmland. Take away from that gross the ever increasing cost of inputs such as fertilizer and chemical not to mention fuel for equipment, and the profit margin for any field is not going to be any greater than it has been in past years. As a matter of fact, it may be less. That begs the question, who is right, Irwin, Apperle, or both. Are the buyers actually farmers, are they buying to increase net worth or to increase net income? Apperle contends that the buying is related most of the time to crop production and he sees that as a vote of confidence in the farming industry on the whole. So, who does Apperle say is buying land at this price? “A vast majority of farmland is purchased for crop production. Only an occasional tract close to town is purchased to develop. Occasionally, there is a rural development site for businesses, etc.” He adds, “Seventy percent of the farmland is still bought by the farming community or local buyers. About 30% of the money coming into the system are outside investors. It’s important to all of us that farmers believe in their business and reinvest their own money. It’s a good sign.” And, then there is another question. What is happening to those who rely on rented farmland to increase their income? There Continue 8 are many smaller farms in Central Illinois where the larger source of their farmland is rental from other entities. These are farmers who want to grow their production coupling with farmers who have retired, or those who have inherited land with no ability to farm it personally. Cash rents are also on the rise, though the increase in rents have been more gradually and as of 2021, rents were not the highest in a 30-year tracking done by the USDA National Agricultural Statistical Services. As of 2021, the average cash rent state-wide was $227 per acre while the peak in cash rents was in 2014 at $234 per acre. While these figures show the overall movement of cash rents, it must be noted that the figures are a state-wide average. Southern Illinois rents are very low, while central Illinois rents including Logan County are the highest in the state. According to an article written by Gary Schnitkey, Krista Swanson, Nick Paulson (Department of Agricultural and Consumer Economics - University of Illinois) and Carl Zulauf (Department of Agricultural, Environmental and Development Economics - Ohio State University), published in the September 2021 University of Illinois FarmdocDaily online, “The counties with the eight highest cash rents are all located in central Illinois: [again these are averages] $311 per acre in Macon County, $297 in Moultrie, $297 in Piatt, $291 in Logan, $280 in Sangamon, $278 in Christian, $278 in Menard, and $275 in De Witt. Higher cash rents also occur in northern Illinois (Carrol at $268 per acre, DeKalb at $268 per acre) and western Illinois (McDonough at $256 per acre).” Like Apperle’s observation on land prices, the article indicates that the value of the rents is being driven by commodity pricing, but also comes with a warning. “We note, however, that increasing cash rents presents risks to farmers. Higher returns in recent years have occurred because of trend or higher yields, relatively high prices, and Federal payments through ad hoc programs such as the Market Facilitation Program and Coronavirus Food Assistance Program. A return to average commodity prices from 2014 to 2019, without continued ad hoc support, would lead to very low and likely negative farmer returns.” Therefore, those who rent farm ground will need to be all the more diligent in negotiating Continue 8