Why Now is a Good Time to Sell Farmland in Illinois Despite the Downturn in the Rural Mainstreet Index

If you’re a farmland owner in Illinois, recent reports might seem discouraging. The latest Rural Mainstreet Index (RMI) for August 2024 shows the overall region, including Illinois, slipping deeper into contraction. For the 12th consecutive month, the index—measuring economic activity in rural America—remained below growth neutral at 40.9, with Illinois specifically seeing a drop from 44.8 in July to 44.5 in August. Declining agricultural exports, weak commodity prices, and a sluggish farm equipment market are driving these numbers down.

But despite these challenges, there are compelling reasons why now might actually be the right time to sell your farmland.

1. Favorable Long-Term Trends in Land Values

While Illinois’ farmland price index has fallen, it’s important to keep things in perspective. The August 2024 reading of 45.9, though below neutral, is only slightly lower than 52.1 in July, and it reflects fluctuations typical of the agricultural cycle. Historically, farmland has shown resilience, often appreciating over the long term even when commodity prices dip. In fact, compared to other assets, farmland has demonstrated strong returns, especially when considering its dual-use potential for both farming and development.

If you’ve owned farmland for several years, chances are it has appreciated significantly. Selling now, when land values are still relatively strong despite short-term economic fluctuations, could provide an opportunity to lock in gains before any further potential downturns.

2. Demand for Development

Illinois, particularly Central Illinois, continues to experience demand for farmland from developers. While agricultural commodity prices may be weak, rural areas around major cities like Chicago and Springfield are seeing demand for country living properties, solar energy developments, and even industrial projects. Your farmland might attract interest from buyers looking to invest in non-agricultural uses.

With cities and towns expanding, developers are seeking open land for projects, especially along transportation corridors and near growing suburbs. Selling your farmland for development purposes could offer a premium compared to agricultural use alone.

3. Favorable Crop Outlook in Illinois

Even though the broader agricultural economy is struggling, there’s some good news: crop conditions in Central Illinois are looking favorable. According to Jim Eckert, CEO of Anchor State Bank, crop yields are on track to perform well this season. This makes your land more attractive to potential buyers who might be looking for operational farmland that can provide immediate returns.

In regions like Illinois, where the soil quality is high and crop outlooks are promising, potential buyers might see the current downturn as an opportunity to acquire productive land before agricultural prices inevitably rebound.

4. Rising Interest Rates: Time to Act

One of the key factors impacting farmland buyers today is rising interest rates. While this might seem like a deterrent, it can also be an incentive for certain buyers to act now. As borrowing costs increase, some investors may be looking to secure deals before interest rates rise further. For sellers, this means you could attract serious buyers who are motivated to close a deal before financing becomes more expensive.

By positioning your property as a solid investment during this period of economic uncertainty, you may find buyers eager to lock in their farmland acquisition now rather than wait for the market to change.

5. Diversification for Investors

For many farmland owners, the property has been a reliable source of income, but diversification can provide financial stability, especially during economic uncertainty. If you’ve been considering selling your farmland to diversify your investments, now is a strategic time. You could use the proceeds to invest in other income-generating assets, such as real estate, stocks, or bonds, while prices remain stable in these sectors.

Given the downturn in the Rural Mainstreet Index, other markets may offer more immediate returns or growth potential. By selling now, you can capitalize on the relative stability of farmland prices and reallocate your funds to diversify your portfolio.

Conclusion

While the Rural Mainstreet Index paints a challenging picture of the agricultural economy, selling your Illinois farmland now can still be a wise financial decision. Farmland values remain resilient, and development demand offers opportunities beyond traditional agricultural use. With favorable crop conditions, rising interest rates, and the potential to diversify, now may be the perfect time to sell your farmland, ensuring you benefit before further economic shifts. Timing the market is always difficult, but taking advantage of today’s opportunities could yield long-term financial benefits.