By Marie Coffin
When we look at historical prices of agricultural land, we see trends that indicate the volatility of this market. We can begin by looking at national trends, which illustrate the tumultuous nature of land prices. Some states saw broad changes because of natural events such as droughts or floods that hit an entire region; meanwhile, other states were largely immune to these fluctuations.
Figure 1 shows agricultural land price trends, by state. Even in this high-level summary, it’s difficult to make general statements about land prices, as we see very different trends in different parts of the country.
Figure 1: USDA survey of agricultural land prices over time, by state. The blue line at the top is New Jersey; the teal line at the bottom is Montana.
Conclusions we can draw from this chart include:
- States with larger urban areas were highly affected by the real estate bubble from 2003-2012, approximately. (As we will discuss below, this effect is highly localized within states.
- A number of Midwestern states display a “secondary bubble” peaking in 2013/2014. We believe this to be driven by high commodity prices following the drought of 2012.
- Note that some states experienced both bubbles, but to differing extents.
- Western states such as Montana and Wyoming seem to have experienced no bubble at all.
Analyzing Pricing Trends Within States
To illustrate how local trends vary within a state, let’s look at the state of Illinois: The Prairie State has a mixture of highly urbanized areas (in and near Chicago), as well as some very rural areas that are almost entirely farmland.
Figure 2 shows the statewide trends for Illinois: Land prices rose sharply from 2004 to 2008, and dropped slightly from 2008 to 2010, reflecting the housing real estate bubble. Land prices rose sharply from 2011 to 2014, driven in part by strong commodity futures. From 2014 to 2018, prices have dropped slightly.
Figure 2: State-wide agricultural land trends in Illinois, from Quick Stats USDA Survey Data.
When we look at counties individually (Figure 3), a somewhat different picture emerges. Surveys at the county level are conducted every five years (1997, 2002, 2007, etc). It can be hard to pick out details with so many counties on the same graph, but it’s clear that different counties show different trends.
Figure 3: Value of agricultural land per county in Illinois. County-level survey is taken every five years. Each line represents a different county in Illinois.
Figure 4: Agricultural land price trends, Cook (gold) and Dupage (green) counties in Illinois.
The Urban/Rural County Breakdown
Figure 4 shows the two most urban counties in Illinois: Cook County, where Chicago is located, and Dupage County, just to the city’s west. Some details are obscured by the five-year time windows, but we see that both counties show similar trends: a peak in 2007, some falling-off in 2012, and a steep rise in 2017.
By contrast, Edgar County (central-east agricultural portion of the state), shows quite different trends: There, land prices have risen gradually but steadily over the past fifteen years, and have been apparently unaffected by the housing bubble.
Figure 5: Agricultural land price trends, Cook (gold) and Edgar (green) counties in Illinois.
Generally speaking, counties in Illinois show one of two trends: the “urban” trend of Cook and Dupage counties, or the “rural” trend of Edgar County. With those trends in mind, it’s interesting to consider Sangamon County — a mostly agricultural area that contains the city of Springfield, the state capital that has a population of over 100,000. Does Sangamon look like an urban county, or like a rural county?
Figure 6: Agricultural land price trends, Cook (gold), Edgar (green), and Sangamon (pink) counties in Illinois.
The trends in Sangamon County are almost identical to the trends in Edgar County, and in complete contrast to the trends in Cook County.
These graphs show that in order to make sense of land prices, we need localized information. Also, we can’t simply assume that the past is a good predictor of the present and future: Outside of Cook County, land prices in Illinois were essentially flat from 1997 to 2002. In 2002, one might have reasonably expected that trend to continue, but such an expectation would be wrong. In rural Edgar County, farmland prices actually fell slightly from 1997 to 2002. But by 2007, prices had risen 63%, and by 2012 had risen an additional 72%. Over a ten-year period from 2002 to 2012, land prices nearly tripled.[1] But from 2012 to 2017, prices increased more gradually.
These graphs also show increasing variation over time from one county to another. In 1997, rural counties showed a very tight band of prices, ranging from $1,000 to $3,000. By 2017, the range is much wider: $3,000 to $10,000. Over that 20-year period, land prices increased in every county — but some parts of Illinois saw much bigger increases than others, even when urban-adjacent areas are excluded. To understand the value of land, we cannot rely on history; we need to understand the fundamental drivers of valuation.
About Marie Coffin
Marie Coffin is the VP, Science and Modeling at CIBO, a science-driven software startup. She has focused on being a biostatistician at agriculture companies. Prior to CIBO, she worked for Monsanto, Icoria, Paradigm Genetics, and was an assistant professor at Clemson University. She holds a BS in Mathematics from South Dakota State University and a Ph.D. in Statistics from Iowa State University.
