By Katie Micik Dehlinge
Lots of farmland in Illinois traded hands for more than $20,000 per acre in 2023. Plenty sold for even more than that, but most of that ground had development potential.
While there are many price factors at play, on average 40-acre or larger fields of commercial farmland sold for $12,989 per acre in 2023, according to transaction data analyzed by AcreValue.
AcreValue pulls public data from more than 40 sources into a searchable, geographic format, enabling users to find detailed data on individual parcels including sales records, soil maps, crop history, proximity to utilities and more.
DTN is teaming up with AcreValue to share insights into farmland trends, starting with examinations of high-priced sales in several Corn Belt states. DTN used AcreValue's database to identify sales and ownership trends, and its Market Explorer feature identifies statewide trends.
Then, DTN cross-checked buyer and seller names with other publicly available information to provide context to the timeless question: Was the buyer a farmer or an investor?
Doug Hensley, president of real estate services at Hertz Farm Management, told DTN previously that farmers buy approximately 70% of the land that comes to market, and there are three primary types of investors. Hensley was not involved in DTN's analysis of AcreValue's data.
The first type of investor are institutional buyers, like TIAA-CREF, Prudential or the Church of Jesus Christ of Latter-day Saints, commonly known as the Mormon church. While reviewing the data for Illinois's Top 10 farmland sales, DTN saw a few LLCs associated with these buyers, even though they didn't make the list of highest sales.
The top sale, however, was purchased by a different institutional investor: PGIM U.S. Agriculture Fund LP, which advertises $10.3 billion of agriculture assets under management on its website.
The most common type of investor, Hensley said, is someone who "grew up in an area and they've either inherited or bought farms, and they want to continue to add on to whatever they own because it's an important piece of their portfolio."
Then, there are what he calls "pure-play investors," individuals seeking the best return on their money, like Bill Gates. In the era of near-zero interest rates, cash rents provided a reasonable annual return. But in today's interest rate environment, those investors may opt to put money into other investments, like a risk-free CD with potentially higher earnings.
A few of the other buyers on the list appear to fall into the local investor or pure-play investor buckets, but that cannot be said with certainty because they may have farming connections we are unaware of.
HOW DTN IDENTIFIED SALES
AcreValue shows there were 17,792 sales of all kinds of farmland in Illinois in 2023, and most did not meet DTN's search criteria, which was geared toward sales of land that would remain in crop production.
To narrow the search, DTN only included parcels of 40 acres or more with a soil productivity index (PI) of 133 or higher, which meets the definition of Class A farmland. At least 92% of each field needed to be used for crops, which filtered out wooded tracts with high recreational use. We also set a minimum price of $17,000 per acre to limit the results. AcreValue showed 138 sales matching our criteria.
From there, DTN sorted through the results to exclude sales where development potential appeared to play a role in the price. We did this in several ways. In some cases, the name of the buyer was all we needed, such as Loves Travel Stops and Country Stores. In others, the location was key. Many of the sales with $30,000 price tags were right off an interstate exit, adjacent to an industrial area or likely to form a new subdivision.
DTN also excluded sales between known business associates or family members. We did this by researching business entity registrations since many of the sales in our search were purchased by limited liability companies and partnerships. We also reviewed AcreValue's data on nearby landowners to gauge ownership trends in an area. In at least one case, this turned up other properties jointly owned between the buyer and seller.
More often, this review of nearby property ownership told an interesting story about why a buyer might be interested in a particular piece of property. In several of our Top 10 listings, the land was adjacent to the buyer's property or property owned by people with the same last name.
Click here to see more...