The value of farmland increased again last year - by as much as 45 percent over 2006 in some portions of the state. Prices being paid for land are up significantly, according to the annual survey from the Illinois Society of Professional Farm Managers and Rural Appraisers in connection with the University of Illinois.

"The survey results show us that farmland is still heavily in demand as an investment commodity," said Bob Swires, chairman of the Illinois Land Values Conference, held last week in Morris, where the report was issued.

State records show Illinois farmland values have climbed steadily since 2000, with prices climbing in recent years by as much as 60 percent or more. Land rated as having excellent productivity sold for upwards of $7,000 per acre in some parts of the state last year, said the report.

Land prices vary based on productivity classifications: Excellent, good, average and fair.

"In many cases, excellent land is just not available. Buyers settle for good or average land, instead," said Carroll Merry, the society's executive director, speaking from his office in Menomonee Falls, Wis.

Price increases can be traced to record commodity prices as well as the entrance of investors into the farmland marketplace. "Investors are seeing agriculture as a producer of energy, not food, and that is making the investment in land very attractive," said Swires, the operator of a land management company in Danville.

While investors are entering the market, the principal buyers of Illinois farmland in 2007 were farmers, the report said. "The largest single group of buyers - 49 percent - were farmers buying adjacent or nearby land," said Norm Bjorling of Soy Capital Ag Services in Peoria. "Another 11 percent (of 2007 buyers) were farmers who were relocating to other parts of the state," he said.

Prices moved dramatically higher in 2007 for central Illinois land rated excellent located just west of the Illinois River - in Stark and Pike counties, said Bjorling. "The best land in that area went up from 35 to 45 percent (in 2007 compared to 2006) while good land rose 10 to 40 percent and average land increased from 10 to 25 percent," he said.

The decrease in 1031 transactions around the state also continued, said Bjorling. The 1031 deals, named for a specific tax code, involve providing a tax break on Illinois farmland purchased within a year of the sale of farmland elsewhere in the state.

The 1031 transactions, which accounted for 53 percent of all the farmland deals in the state in 2006, dropped to 34 percent last year, said the report. "Last year, we saw a lot of development slow down, particularly in the collar counties around Chicago," said Merry, referring to an area where farmland had been selling for premium prices to accommodate a variety of development projects.