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Senior Advisor

Is Illinois Farm Land Still A Buy?

According to this study, Illinois farm land is still a good value.

 

http://farmdocdaily.illinois.edu/2013/05/historical-illinois-farmland-sales.html

 

" Unlike the 1980s, the current market does not appear to be overvaluing farmland. In fact, farmland prices still have some room to "catch up" to high farm incomes and low capitalization rates. Perhaps more sensibly, the current disparity between imputed and actual farmland prices may reflect a sense that current low interest rates are not sustainable in the long-term. Overall, although Illinois farmland prices have increased to record heights at a rapid pace, they are explained well by fundamental factors."

 

"It is apparent that the recent run-up in Illinois farmland prices has been of truly historic proportions. Although the current pairing of farm incomes and interest rates has driven farmland prices to record levels in almost all regions of Illinois, skepticism over the sustainability of these factors may be holding current farmland prices below levels predicted by capitalized rents. For better or worse, farmland prices promise to be a topic of much discussion in the foreseeable future.

Issued by Erik D. Hanson and Bruce J. Sherrick
Department of Agricultural and Consumer Economics
 University of Illinois"

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Senior Contributor

Re: Is Illinois Farm Land Still A Buy?

ILLINOIS Farmland is like Iowa farmland currently, according to the 100 years of data of average cash rents, ROI Ratios, etc, Iowa farmland is slightly underpriced by maybe $1,000 to $2,000/acre. This is only on  the higher quality farmland of a CSR Ratio of 74 and higher. This is using a normal corn yield and a $5.50 corn price. At a $5 corn price it is probably priced correctly and at a $4.50 corn price it may be slightly overpriced by $500 to $1,000/acre. Again, this is just using the past 100 years of data showing the average return ratios over the years. But it is actually pretty amazing how if farmland is high priced using this past history, it appears that in just a few years, farmland always comes back to the equalibium ROI Ratio in the 4 to 6% range. This actually is true 100% of the time.

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Senior Advisor

Re: Is Illinois Farm Land Still A Buy?

Say what you will, but nothing is certain 100% of the time. Your numbers aren't any different. Unbelievable, that is most definitely for certain.
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Veteran Advisor

Re: Is Illinois Farm Land Still A Buy?

Question I haveis, Is Kansas farmland still a buy?  or maybe, was it ever a buy?

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Senior Advisor

Re: Is Illinois Farm Land Still A Buy?

What do you consider a buy? My idea and your idea might be completey different. Kansas is no different than any other state, we've got productive soils and not so productive soils. Irrigation and dryland as well as climate differences almost in each corner of the state.
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Senior Contributor

Re: Is Illinois Farm Land Still A Buy?/Shaggy98

Shaggy98- of course I could be wrong since I don't have a crystal ball. But if you look at the past 75 years or so of data on Iowa farmland, it always comes back to an ROI Ratio for growing corn in the 4 to 6% range. Sure there are some years where it is over 10% and some years where it is 0%, but the equalibium that it always goes back to is 4 to 6%.. And as far as the farmland appreciation rate, again the long-term average yearly appreciation rate is around 5%. And again we may have some years like 2012 where the land appreciation rate was 35% and some years where it was a -33% (negative), but the long-term average is 5%. If you want to be a farmland owner or investor you should consider farmland as a long-term investment, not one to get in and out in just a 5 year time period. Just my opinion and that is worth the money you paid for it which is nothing.

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Advisor

Re: Is Illinois Farm Land Still A Buy?/Shaggy98

even better investment if you marry it!

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Advisor

Re: Is Illinois Farm Land Still A Buy?


@JIM Meade / Iowa City wrote:

According to this study, Illinois farm land is still a good value.

 

http://farmdocdaily.illinois.edu/2013/05/historical-illinois-farmland-sales.html

 

" Unlike the 1980s, the current market does not appear to be overvaluing farmland. In fact, farmland prices still have some room to "catch up" to high farm incomes and low capitalization rates. Perhaps more sensibly, the current disparity between imputed and actual farmland prices may reflect a sense that current low interest rates are not sustainable in the long-term. Overall, although Illinois farmland prices have increased to record heights at a rapid pace, they are explained well by fundamental factors."

 

"It is apparent that the recent run-up in Illinois farmland prices has been of truly historic proportions. Although the current pairing of farm incomes and interest rates has driven farmland prices to record levels in almost all regions of Illinois, skepticism over the sustainability of these factors may be holding current farmland prices below levels predicted by capitalized rents. For better or worse, farmland prices promise to be a topic of much discussion in the foreseeable future.

Issued by Erik D. Hanson and Bruce J. Sherrick
Department of Agricultural and Consumer Economics
 University of Illinois"


Again, a wonderful prognostication by the drones who continue to live off the public dole at the University of Illinois.  It is clear they have to publish this nonsense in order to justify their tenure and existence at that institution.

 

Cap rates are dead, because there is absolutely no relationship between a cap rate of 2% and the income flowing from farming operations in this country.  Example if the net income from an acre of corn is $800 then the value of the land using the anachronism known as a "capitalization rate" would be $40,000 an acre.   That value only exists as long as grain prices remain high . . . lets see what the values are when the faux interest rates return to 8% and corn is selling for $4 a bushel. 

 

These "Yo-Yo's" at the University of Illinois are parroting what was professed in the 70's and early 80's before the blow out came in farming.  The government is already sending a message that they are going to push grain prices lower even if they must fabricate numbers, unfound inventories, or increase estimates of production.

 

 All of these efforts are designed to take the profit out of grain farming and return the grain farmers back into the FSA offices where a "new subsistence" package will be designed to return them to their traditional role as "peons". 

 

These two professors are a prime example of the nonsense being published by Universities.  These jokers have nothing at risk, they have a publicly funded pension plan and a guaranteed retirement at the publics expense.  In short, they are "kept cattle" just like those in pens in Dalhart. 

 

Give me a break!  This bubble in land, and debt in this country, is going to blow sky high.  The FED has driven the debt in our government to $17,000,000,000,000 from about $4,000,000,000,000 a few years ago.  

 

We are broke, and they have now accomplished the objective of reinflating the stockmarket for the Jews in New York who manage the money in this country.   Leverage blew up the land markets in the 80's when the FED raised interest rates to 16% and collapsed land prices.

 

These nimrods profess that these times are not like the 80's, I think the situation we find ourselves in right now is worse than the 80's.  Why?  Because in the 80's farmers liquidated debt, either in bankruptcy or voluntary write down by financing institutions holding that debt and the system of deflating that bubble worked.  

 

That adjustment of any kind of bubble had worked in our country's history from its inception, that system is now dead in this country, because our government does not want anyone to fail in this country.

 

When in fact, it has always been the risk takers that had pushed the country forward and many who became successful failed before they became successful in their endeavors.  We now live in a country, where the man on the street, no longer can assume the risk to fail . . . or succeed, because the capital markets have been taken over by the "too big to fail" entities in this country.  In short . . . without a "risk reward" system where citizens can assume a risk to reap a reward or experience a loss,  we then will become what Europe is today. 

 

Those tools no longer exist as evidenced by the increased purchases of US Treasuries by the FED which is buying up the junk on to big to fail banks in New York, and providing zero or very low interest rates to these institutions to speculate in the stock market to drive the Dow to 15,000, all of which is a nothing more than a house of cards.  

 

You have a "feel good" market created not buy fundamentals or growing GDP and profits of companies in this country.  The profits in the past five years have been a result of cutting labor costs, or farming those jobs that Americans used to do to India, Vietnam, or China. 

 

So you can listen to these pied pipers in Illinois, who have nothing at risk, or as we say here on this site "no skin in the game" and hide out in the hallowed halls of academia where their brains rot and from time to time become lucid, believing they know what no one else knows.  

 

I guess . . . I am not going to go to my neighbors cattle feed lot where cattle are kept to get advice from those who have been lost in "next year country" most of their lives and have seldom been in touch with the real world most of us live in.  

 

Owning farmland is the "cleanest dirty shirt" in this country to put money into right now, but so were tulip bulbs at one time.  Illinois farmland only has one problem . . . it is not located in Iowa!  Pass the popcorn and get me another Corona.   Adios Amigos. John

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Senior Contributor

Re: Is Illinois Farm Land Still A Buy?/FAUST-HOW ARE THINGS LOOKING SOUTH OF I-80????

At $4 corn Faust in Northern Iowa, a 200bu yield and a $12,500/acre farmland value, it drops the overall ROI Ratio to 2% for growing corn. The 75 year average for growing corn is around 4 to 6%, so that would make $12,500/acre farmland a little overpriced. To get back to the long-term equalibium ROI Ratio, the value of farmland would need to drop by maybe $1,500/acre. A $1,500/acre drop in farmland values wouldn't be good, but if you don't plan on selling your farmland, it is only a loss on paper, so not the end of the world. How's everything looking south of I-80 in Iowa, pretty good?????.

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Advisor

Re: Is Illinois Farm Land Still A Buy?/FAUST-HOW ARE THINGS LOOKING SOUTH OF I-80????

rsw - just leaving DSM to head to the rural backwater for a few days, had to back up my computer onto my flash drive.  Nee to see what is going on and to mow the lawn down there and plant a few more fruit trees, probably work in the garden the next few days until things dry out.  

 

I think things are pretty much at a stand still for maybe another week, so will just run maintenance on equipment and now that it is warming up, head to Rathbun or my ponds and catch a few fish.  Probably start planting beans around May 20th if weather permits.  Told my wife I wanted to go to South Dakota land Auction, might have to put that one on the back burner.  

 

Finding a few opportunities in Montana and Dakota's now, with owner financing, kinda looks like the 70's may be returning in some areas of this country, where the owners realize that perhaps carrying a contract and earning interest on their money may be the better option that selling for cash.  Besides the capital gains can be spread out over the life of the contract rather than taking the hit for all tax if it were a cash sale.     Adios Amigo. John 

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