News & Analysis

Illinois auction signals farmland market resilience

Strong yields and soybean prices help support Midwest farmland markets widely expected to fall in the year ahead.

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A recent auction in Illinois suggests that the row crop farmland market is more resilient than some had expected in the face of low commodity prices.

Farmland Partners announced last week that it had purchased 8,638 acres of row crop farmland in Illinois for $55.3 million. The farmland came from the Wilder Farms holdings and was offered in 46 tracts ranging from 15 to 597 acres at an auction in Macomb that brought 64 registered bidders, according to a statement from Schrader Real Estate and Auction, the company that held the auction.

“The operators were in the room, but the investors won out. It was just a question of if we had one buyer or a few,” RD Schrader, the president of the company that held the auction, said in a statement.

“The price per acre of just over $6,400 exceeded the expectations of many of the observers for the predominately levee-assessed river bottom land. It’s evident that investors continue to regard Midwestern farmland as a sound long-term investment.”

With MetLife Agricultural Finance projecting that farmland values will fall by an average of as much as 20 percent by 2018 and land values in Iowa have shown drops of 6 percent last year, the results of the Wilder Farms auction highlight how specific values can vary according to geography, crop selection and management.

Schrader told Agri Investor  that while the recent downturn in commodity prices has created opportunity for investors facing somewhat reduced competition from neighboring farmers, the effects of the evident market correction are being moderated by higher yields.

“We had a lot of sales through the fall and I think land values in general have held in there, stronger than a lot of projections,” Schrader said. “Even as we got closer to the period of wrapping up the harvest, yields were good enough and bean prices were good enough that operators were even stronger towards the end of harvest than they were towards the beginning of harvest. Their cashflow this fall is going to be better than some had expected.”