There is good news and bad news facing Kane County farmland owners this year.
The good news is values for high-quality land should hold steadier in 2016. But the bad news is a softer agricultural land market likely will continue throughout the United States with lower-quality land values expected to decline somewhat, according to Omaha, Nebraska-based Farmers National Co., the nation’s leading farm and ranch real estate company.
“Farmland values in Kane County are holding strong and still increasing in value when we look at the average sale price per acre between 2014 and 2015,” said Nick Westgerdes, a Rochelle-based FNC Illinois field representative.
Overall decreases in scattered Illinois farmland values tend to be more in the hundreds, not thousands, of dollars per acre, he adds. Nevertheless, land values, in general, will remain historically high when compared with long-term trends, which might encourage new buyers to enter the market or existing investors to expand portfolios, according to the FNC.
Commodity price decline
Farmland values are beginning to experience small, incremental declines, primarily due to lower corn and soybean commodity prices, Westgerdes said, citing a recent consensus of most Illinois land brokers.
“In 2012, the price of a bushel of corn averaged roughly $6.67. Today, the price is closer to $3.50 per bushel in many cases,” he added.
In 2014, there were 46 sales in Kane County, including land development sales, he said. The average sale was $24,900 per acre when including the premium paid for various land development sales. If sales likely for development purposes aren’t included, the average sale value for agricultural land dropped to $9,500 per acre.
In 2015, there were 58 sales in Kane County. The average sale was $22,000 per acre when including the premium paid for various land development sales. When land development sales aren’t factored in, the average sale value for agricultural land dropped to $10,500 per acre.
Meanwhile, high-quality farmland in Kane County (B+ and A quality) averaged $11,400 per acre in 2015.
“There were nearly 21 total sales that were made up of high-quality land,” Westgerdes said.
When considering the average per-acre price over all sales recorded, suburban sprawl impacts Kane County farmland values. Yet, farmers or land investors seldom compete with big-box stores and hotels for the same land, Westgerdes added.
Suburban sprawl had a much larger impact on county land values 10 years ago, “but it’s beginning to creep back into the scenario,” said Kaneville resident Joe White, president of the Kane County Farm Bureau. He has been a bureau member since 1975 and farms 950 acres of corn, soybeans, wheat and hay.
Farmers still will want to buy land when the right parcel comes up for sale, Westgerdes said, but they are being forced to offer less compared with offers made several years ago “when we were coming out of some of the most profitable years we have ever seen in the farming industry,” he added.
“If we continue seeing value increases of Kane County farmland overall during times of lower commodity prices, then the primary influencing factor would most likely be those isolated areas where premiums are being paid due to competition for land between developers/land speculators and farmers/land investors,” he said.
At present, little Kane County farmland is on the market, White said. He estimated that 75 percent of more recent Kane County farmland sales have gone to other farmers, with the balance going to investors – not necessarily developers.
Nationwide, many farmland sales today are estate sales.
“Agriculture is going through a generational shift,” White added. “The older generation of farmers is retiring, and many don’t have heirs who want to farm.”
Pioneering KCFB founders envisioned Kane County consisting of developed area along the Fox River, a developing area to the west plus open land for farming.
“We still have a lot of open land,” said Mike Kenyon of South Elgin, the KCFB secretary/treasure. Kenyon also operates a dairy farm and farms 1,600 acres of corn, soybeans and hay.
Established in 2001, the Kane County Farmland Protection Program offers agricultural conservation easements to landowners wanting to sell or donate development rights to their farm. More than 5,400 acres are now permanently protected in Kaneville, Big Rock, Virgil, Burlington, Plato and Campton townships.
“Kane County has always valued open land and worked to [ensure] there will always be open land,” Kenyon said.