By Christine Stebbins
CHICAGO (Reuters) - Farmland values in the key U.S. grain state of Illinois are seen easing slowly over the next 12 months after years of record prices due to a fall in both corn prices and government subsidies for crop insurance, according to a survey of the state's farm managers.
Eighty percent of the farm managers and rural appraisers responding to a mid-year survey of the Illinois Society of Professional Farm Managers and Rural Appraisers expected the value of the state's farmland to hold steady or decline over the next year. (Survey: http://link.reuters.com/caf82v)
Over the next five years, 54 percent of the survey respondents expected farmland to stabilize or ease further.
"There was more of a negative on farmland prices than I thought there would be," said Gary Schnitkey, a University of Illinois economist, who summarized the survey results. "Most were anticipating a relatively small decline from zero to 5 percent but that's still going down."
If realized, the easing back of land values would mark a big contrast from rising U.S. Midwest farmland values seen since 2006 - the start of corn-based ethanol boom, sparked by U.S. energy policy to use more biofuels.
Between 2006 and 2013, average farmland prices in Illinois more than doubled from $3,640 per acre in 2006 to $7,900 in 2013, according to the U.S. Department of Agriculture. Illinois is typically the No. 2 corn state after Iowa.
These increases compare to an average annual growth rate of 6 percent between 1986 and 2006. (Graphic of farmland versus corn prices: http://link.reuters.com/syw62v)
Massive U.S. plantings and nearly ideal weather after last year's historic drought have grain analysts forecasting the price of corn, the bellwether U.S. crop, to stay below $5 a bushel for several years, compared to last summer's all-time highs over $8. Lower grain prices will also mean a cut in crop insurance subsidies as coverage is based on both yield and price.
The most recent quarterly farmland surveys released by the Chicago and Kansas Federal Reserve banks show land values continued to notch record highs in the second quarter but the pace of sales slowed from a year ago.
(Editing by Lisa Shumaker)