WEST LAFAYETTE, Ind. — The value of all Indiana farmland rose an average of roughly 2 percent over the past year, according to a Purdue University survey.
Top-quality land was up 1.6 percent to $8,668 an acre, while average-quality land increased 2.1 percent to $7,072. Poor-quality land was up 2.4 percent, to $5,407. The annual farmland values report was released earlier this month.
Cash rents also increased during the period. Rents rose 2.4-3.2 percent depending on the type of farmland.
“I was a little bit surprised (about the increase in land values),” said Craig Dobbins, Purdue professor of agricultural economics and author of the report. “I tend to run on the pessimistic side. I really wasn’t expecting to see much of an increase.
“I view (the 2 percent increase) as status quo, nothing to get excited about. The market is where the market is. It’s trying to figure out which way to go. I’m betting that downward is more likely than upward.”
A reduction in the amount of land available for purchase contributed to the rise in values. “The market is pretty thin right now,” Dobbins explained. “There aren’t as many sales as there were a few years ago. Each observation gets weighted a whole lot more than it would otherwise. You’ve got to convince somebody to let go of what they have.”
Purdue’s survey was done in June for the prior 12 months. Respondents included farm managers, rural appraisers and agricultural loan officers. The survey categorizes farmland as top, average or poor, depending on productivity, location and other factors. The values are all for tillable, bare land.
The highest-valued land in the state was in the west-central region, where top-quality farmland was $9,452, up 2.3 percent from June 2017. Average-quality land increased 0.5 percent to $7,815. Poor-quality land was $6,245, up 0.6 percent.
The biggest regional jump in values was in southeastern Indiana, where land is also the least expensive. Top-quality farmland rose 13 percent to $6,825. Average-quality land was up 13.3 percent to $5,450, and poor-quality land increased 7.9 percent to $3,831.
“My suspicion is there may be some non-farm factors in the southeast that are influencing things,” Dobbins said. “Louisville has had some impact on rural areas, and Cincinnati isn’t that far away. Transition land is really strongly influenced by location.
“People that make these sorts of purchases are really strong competitors. They have more money to pay than a farmer traditionally would. That’s why we see land transitioning out of farming. The rest of the economy is really strong. If a company is looking to expand, now may be a good time to do that.”
The value of transition land statewide was up 19.1 percent, to $13,171.
The stronger economy has put more pressure on farmland close to existing development, said R.D. Schrader, president of Schrader Real Estate & Auction Co., based in Columbia City. Housing or commercial developers may be looking to purchase transition land.
Poor-quality land values may be up due to the recreational opportunities often found on such property, including woods and water, he said. “The economy is good and discretionary spending of money is up. More money is out there, more ‘fun’ money.’”
The supply of farmland has remained relatively tight, a good thing for land values, Schrader noted. “There aren’t as many buyers as there were five years ago, but there’s still money out there looking to be invested. Operators and investors – small individual investors or investment funds – are seeing the long-term viability of the value of farmland.”
Howard Halderman, president of Halderman Farm Management and Halderman Real Estate Services based in Wabash, said he wasn’t surprised farmland values in the state were up a bit. He pointed to continued low interest rates as one factor in the increase in farmland values.
“That’s not new, and they have gone up a bit but they’re still historically low. Also, since 2012, we’ve had pretty consistent production in terms of corn and soybeans. There’s a very low supply (of land) for sale,” Halderman said. “Even though farm incomes are down, there was an opportunity to sell plus-$4 corn and plus-$10 beans for a couple of months earlier this year.”
The supply of land is tight because farmers haven’t been forced to sell their land and investors are sticking with their investments, he said. “Farmers don’t sell unless they have to. Farmland has been a rock-solid investment. Investors may decide to leave their money in farmland.”
Cash rents were $261 an acre for top-quality farmland, up from $253 last year. Average-quality land was up $5, to $210. Poor quality was also up $5, to $168.
The highest rents were in west-central Indiana. Cash rents for top-quality land were $297, average quality $245 and poor quality $199. The lowest rates were in southeastern Indiana. Top quality was $186, average quality $139 and poor quality $102.
The average value of Hoosier cropland was $6,700 an acre for 2018, unchanged from 2017, according to a recent USDA report. Nationally, cropland averaged $4,130, up $40 from last year.
Illinois cropland was $7,450, up 1.4 percent; Iowa, $8,100, unchanged; Kentucky, $3,880, up 0.8 percent; Michigan, $4,350, down 2.2 percent; Ohio, $5,850, up 1.2 percent; and Tennessee, $3,710, up 1.9 percent.