Farmland Value and Rental Rate Behavior in Illinois

Both farmland values and rental rates have seen significant increases over the past few crop years. The increase in land values, in particular, has members of the agricultural and outside investment communities concerned over the potential for a significant decline in land values and the resulting impacts on the profitability and viability of farm operations. This uses data on land values, rental rates, crop revenues, and interest rates in Illinois from various sources to analyze historical relationships among these factors. The data suggest that current land values are supported by both commodity and interest rate market fundamentals. However, uncertainty over future commodity prices and interest rates results in a wide range for potential land values in both the short- and long-terms. Farm operators, landowners, professional farm managers, and investors need to be aware of and carefully consider these factors in valuation farmland and setting appropriate rental rates and contract designs