Editor's Note: This story first was published in Northern Illinois Ag Mag, published by Sauk Valley Media and distributed in November.
Mark Fassler and his brother Tim were finishing up their soybean harvest in early October. The brothers, who took over farming for their father, work 4,100 acres of soybeans and commercial corn between Sterling and Dixon. This year, the Fasslers had a little more land to farm.
In December 2012, they bought 145 acres of farmland "right next" to the land they already worked, a third of which belongs to the brothers, Fassler said. They rent the rest.
"We’re farmers, and that's what we’re in the business of doing," he said. "We've had a few good years growing corn and beans, and we're lucky enough to have enough equity to purchase some land."
In August, they bought 117 more acres, also near their current land.
"I wish we would’ve bought these up 10 years ago," Fassler said. "But [we] didn't have the equity needed."
Between 2006 and 2013, Illinois farmland more than doubled in price, from an average price of $3,640 an acre to an average of $7,900, according to Reuters, which cited the U.S. Department of Agriculture. Moving into this year, land values in western Illinois increased by double digits again, but did so at a slightly lesser amount than in previous years, signaling a tapering off.
In its 2013 Illinois Land Values and Lease Trends survey, the Illinois Society of Professional Farm Managers and Rural Appraisers found that while supply is down from a year ago, value is "up modestly."
In Illinois, excellent-quality farmland averaged $13,200 on July 1, up 3 percent, Dale Aupperle, of Heartland Ag Group and the ISPFMRA chairman, reported in a summary of the survey. Additionally, good-quality farmland increased by 2.5 percent to an average of $11,200, and fair-quality land increased by 1.9 percent, up to $9,000.
"It’s just like the other stocks," said Kyle Hansen, a real estate agent and auctioneer working out of the Nevada, Iowa, office of Hertz Real Estate Services. "It’s a cycle. It will go up and come down based on the commodity prices and other factors [like world demand for fuel and food]. ... But it still continues to be a cycle. It will come up and go down. Now it’s leveling off and taking a breath to see where we're going from here.”
Mike Morris is the chief appraiser with 1st Farm Credit and has been based in the Bloomington-Normal office since 2007. He has been appraising since 1999, he said, and handles appraisals in northern Illinois.
"I think if we don't see much change in crop prices, I would call it a stable to slightly softer market," he said. "If we see some real increase or decrease, that could affect the market. Right now, no one is really anticipating that.
"My gut tells me that we'll still see some strong sales, but we’re not going to see anything that’s higher than [land value] in December, unless we see significant increases in commodity prices."
On Oct. 11, December corn was $4.3325 a bushel, down 5 cents from the day before, and November soybeans were $12.6675 a bushel, which was 21.25 cents lower than the market's Oct. 10 close.
Despite the falling commodity prices, in a market that's been described by some experts as volatile, land values have been increasing by double digits for several consecutive years.
Bruce Sherrick, an agriculture professor at the University of Illinois, said that rise follows good recent incomes for farmers and continued use of corn for, among other things, renewable energy that keeps demand for land high, but supply low.
"Because so little farmland turns over, it’s really, really hard to get a clear picture of what’s going on," Sherrick said. "Income in northern Illinois is higher than southern Illinois because you grow more. Because of the slow turnover, it's hard to get a clear picture."
Todd Slock works for 1st Farm Credit as a real estate appraiser out of the Rock Falls office. He's been an appraiser for 6 years, and previously spent time working near Ottawa in LaSalle County.
Land sales usually pick up after harvest, when farmers have a better idea of how much they made on the year's crops, Slock said. By early October, there hadn't been many listings, which could be the result of commodity prices falling and interest rates "being up slightly."
Both pieces of land the Fassler brothers bought were from heirs who don't plan to farm and don't want to manage the land. For them, like the pension funds or investment groups, the land is a financial investment and not a farming asset.
"People look at what their alternative is," Morris said. "And they look at a stock market that's been volatile and CDs that aren't going to pay as well. ... I think in a lot of cases, people think they can make something off the land, so they hold on to it."
According to the ISPFMRA survey, the "vast majority" of farms in northwest Illinois were purchased by local farmers, and several counties saw sales of more than $12,000 an acre for excellent productivity tracts, and three counties had sales match or exceed $14,000 an acre.
"I don't think there’s a big surprising story in any of this," Sherrick said from his office at the University of Illinois. "It's kind of the new normal – higher priced input and higher priced output. ... It adds to the amount of capital [needed] to get into the industry."