Land Market and Lease Trends in Illinois

Illinois Land Values Conference

March 16, 2006Morris Illinois

Results of Membership Survey on: Farmland Buyers and Sellers

& Lease trends

Estate sales dominate sellersSellers of Farmland, Illinois, 2005.

1

17

6

43

22

11

0 10 20 30 40 50

Others

Individuals

Institutions

Estate sales

Retired farmers

Active farmers

Percent

Settle estates main reason for selling farmland

Reasons for Selling Farmland, Illinois, 2005.

1

5

4

37

4

7

42

0 10 20 30 40 50

Other

Close-out undivided interest

Re-orient investment

Received a good price

Forced liquidation

Need cash

Settle estate

Percent

Investors remain main buyers

Type of Farmland Buyers, Illinois, 2005.

2

10

1

10

36

10

31

0 10 20 30 40

Other

Recreational buyers

Institutions

Local investors

Non-local investors

Relocating farmers

Local farmers

Percent

Buyer Attributes include that…

• 56% of buyers use 1031 exchange funds

• 62% of buyers did not need debt capital

1031 Buyers driving market

Reasons for 2005 Farmland Price Increase, Illinois.

7.9

4.1

3.6

2.6

1.6

1.1

0.1

0 2 4 6 8 10

Large number of 1031 buyers

Limited supply of farmland

Low interest rates

Large number of non-1031 buyers

High corn and soybean yields

Government support programs

Other

Score

Chicago is the “Gorilla”

Location of 1031 Buyers, Illinois, 2005.

Chicago Area57%

St Louis7%

Outside Illinois

6%

Local Area24%

Other Illinois Area6%

Price Increase Expected in ‘06

Expected Change in Farmland Price During 2006, Illinois.

1

4

17

61

15

2

0 10 20 30 40 50 60 70

Decrease more than 10%

Decrease between 6 and 10%

Decrease between 0 and 5%

Increase between 0 and 5%

Increase between 6 and 10%

Increase more than 10%

Percent of Respondents

Stable Trend expected for 2007

Expected Change in Farmland Price During 2007, Illinois.

0

2

31

61

4

2

0 10 20 30 40 50 60 70

Decrease more than 10%

Decrease between 6 and 10%

Decrease between 0 and 5%

Increase between 0 and 5%

Increase between 6 and 10%

Increase more than 10%

Percent of Respondents

Cash rent and custom farming have higher returns

Lease type Excellent Good Average Fair

Traditional crop share 120 110 95 78

Cash rent 150 135 120 103

Custom farming 160 145 130 100

Land Quality

Table 1. Per Acre Farm Incomes that Landlords Receive for Different Lease Types and Land Qualities, 2005.

------------------ $ per acre ---------------------

High end returns and variability

Lease type Excellent Good Average Fair

High 1/3 190 175 150 125

Mid 1/3 170 150 130 110

Low 1/3 150 130 110 90

Land Quality

Table 2. Per Acre Cash Rents for Top 1/3, Mid 1/3, and Low 1/3Cash Rent Leases by Land Quality, 2005.

----------------- $ per acre ----------------------

Cash rents continue to increase

Types of Leases in 2006.

36

7

5

45

6

1

0 10 20 30 40 50

Traditional crop share

Modified crop share with supplemental rent

Modified crop share (other than supplementalrent)

Cash rent

Custom farming

Other

Percent

Growth seen in amount of cash rent leases

Types of Leases Projected in 2006 and 2010.

0 10 20 30 40 50 60 70

Traditional crop share

Modified crop share with supplemental rent

Modified crop share (other thansupplemental rent)

Cash rent

Custom farming

Other

Percent

2006 2010Year

Competition leads to increases

Change Score *

Increase in farmland prices 3.0Competition among farmers 8.6Strong Returns to farmland 3.1Large government payments 0.2

Table 3. Reasons Cash Rents are Increasing.