It is one of the four factors of production, and whether it is one acre or one million you cannot farm without it. Land, it is a commodity that is characterized by just a few simple things. Land is scarce, immobile, indestructible, and unique. These characteristics are what make it valuable. Only one-quarter of the earth’s surface is dryland, and the rest is water. No matter what type of crop you are growing, what type of livestock you are raising, or improvements you are building it all must start with a piece of real estate and a desire to succeed.
Land is not something a lot of people seem to think about yet it is arguably one of the most important pieces in any business or agricultural pursuit. It is often the largest investment a farmer will make in his farming career. It is his livelihood, and his retirement plan all rolled into one piece of “dirt.” Purchasing land is a long-term investment for most, and especially for those of us lucky enough to be involved in agriculture. For most farmers whether they are farming it themselves or have retired and leased it to another farmer it is their main source of income for life. My grandfather was the perfect example of this. He made his last purchase of farmland just a few years before he passed away. For over 160 years farming has been the primary source of income for my family, and without the investments we have made into farmland none of it would have been possible.
In recent years we were seeing record high prices for quality tillable farmland in Illinois. If a tract of highly productive farmland went to auction in 2012, 2013, 2014, and even into 2015 it was not uncommon to see sale prices from $12,000 or even up to as high as $16,000/acre in some regions. That translates into over $1 million for just 80 acres. It was also very common for farmers to be paying $300-400/acre cash rent. Today these prices have started to trend downward some, but what makes farmland valuable, and why are farmers willing to pay such high prices for land? When commodity prices are good such as they were in 2012 and 2013 farmers were looking to expand and reinvest into their operations, and when a quality piece of land came to market for many farmers it was a no brainer to purchase it.
Today Farmland prices have come down as farmers are tightening their budgets due to lower commodity prices. Last week (3/12/18) Sullivan Auctioneers sold 578 acres in Mason County, IL for just under $3.9 million. The average price per acre was $6,735.54 with the highest selling tracts going for $8,700 per acre. The lowest selling tract was sold for $3,150 per acre. This farm was composed of Onarga, Sparta, and Disco soils.
Is farmland worth the investment? In my opinion a good tract of land is always worth the investment because it is a great way to build your personal wealth and transfer that wealth to the next generation. Real estate prices fluctuate just like anything else. However, you will always have something, and it will never be worthless. Even if it does not have monetary value you will still have the rights of ownership that came with the land when you purchased it, and to me that is worth something.
I believe that my passion for land has come from my father and grandfather. They have always taught me that if you take care of the land it will take care of you. This is a value that many farmers hold true, and it could not be more true. There is no substitute for land, and we must take great care of it, and do our best to preserve one of our greatest resources so that we can continue to feed a growing world.
My name is Daniel Woodrow, and I am a senior here at Western Illinois University. I am a member of Alpha Gamma Rho, and I will be graduating in May with a degree in Ag business. I am currently seeking a career as a real estate appraiser, and I look forward to the many opportunities that my education will provide. All pictures in this blog are my own.