August 27, 2003
FEFO 03-15

A HISTORIC LOOK AT ILLINOIS FARM REAL ESTATE VALUES

Each year the National Agricultural Statistics Service of the USDA releases estimated average farm real estate values and cash rents by state. The estimates are based on surveys of farmers from selected geographical areas. The surveys follow strict statistical guidelines. Estimated values maybe revised the following year based on additional information. Revisions may also be made based on data from the 5-year Census of Agriculture. The methodology and timing of the study has changed over time but the statistical information provides some insight as to the changes in farm real estate values from year to year.

AVERAGE ILLINOIS FARM REAL ESTATE VALUE

The average Illinois farm real estate values from 1970 through 2003 are listed in Table 1 and graphically in Figure 1. The average farm real estate value for Illinois in 2003 was $2,770 per acre, the highest on record. This includes the value of all land and buildings. The figure was 4.9 percent higher than the 2002 average of $2,640 per acre. Farm real estate values have shown a year over year increase every year since 1988, or sixteen consecutive years. Since 1999, farm real estate values have increased 23 percent.

Since 1970, average farm real estate values have declined only five times as compared to the previous year. Those years were 1982, 1983, 1985, 1986 and 1987. The largest decline recorded was in 1985, when farm real estate values dropped 25.1 percent compared to 1984. There have been three years when farm real estate values increased over 20 percent, in 1974, 1976 and 1977. The largest increase was in 1977 when values rose 37.3 percent.

Since 1990, farm real estate values have recorded a steady upward increase. The largest increase during that time was a 9 percent increase recorded in 1995. The smallest was a .8% increase in 1993. Low interest rates, low returns on alternative investments and continued use of farmland for developmental purposes have been the main drivers pushing up farm real estate values. These factors seem to have a bigger influence on farm land values than the actual earnings from farm land.

The farm real estate value data is used to construct index numbers of Illinois farmland values. The index can be found at the farmdoc website. http://www.farmdoc.uiuc.edu/manage/land_value.asp

Figure 1. Average Illinois Farm Real Estate Values per Acre, 1970 through 2003.

Issued by: Dale Lattz, Department of Agricultural and Consumer Economics