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Illinois land nets almost $9,000/acre
A recent farm land auction brought just shy of $8,700/acre for a 565-acre farm in central Illinois.
And, it wasn't an investor. This buyer was the one who's going to be farming the ground.
Sounds high, right? Though those numbers are astronomical compared to land prices just a few years ago, it's more important to look at the investment as it compares to the potential profit it can net for the owner, says Murray Wise, land values specialist and president of Murray Wise Associates LLC, an Illinois-based farm land auction and marketing agency.
"The people who have known, farmed and invested in farmland for years understand that the real question is what kind of returns they can achieve as a result of strong worldwide demand for corn, soybeans and other products," says Wise, whose firm conducted the recent land auction near Minonk, Illinois, where the buyer paid a total of $4.9 million for 565 acres.
Wise says there are new fundamentals lining up in the land marketplace that should keep demand stoked to the level where both land values and potential returns should stay high, namely a new grain demand plateau.
"I believe we are in the early stages of a major shift in worldwide food consumption habits, especially in China and other Asian nations. As long as that trend remains intact, farmland will be a rock solid investment at today's prices -- and tomorrow's," he says.
And surprisingly, adds Murray Wise Associates LLC vice president Joe Bubon, farmers -- not large absentee investors -- continue to lead the pack in the race for more farm land.
"For all the conversation about the number of individual and institutional investors purchasing farmland, we continue to see auctions in which local farmers and investors -- who are in the best position to understand the value of the land -- are the high bidders," Bubon says.