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Hoosier farmland values hit record highs again; growth rate slower
By Michele F. Mihaljevich
Indiana Correspondent

WEST LAFAYETTE, Ind. – Indiana’s farmland values hit record highs again this year, but the growth rate was at a slower, more typical pace than the last couple of years, a recent Purdue University survey found.
The average price per acre for top quality land was $13,739 in June 2023, up 7.3 percent from June 2022, when it was $12,808, according to the annual Indiana Farmland Value and Cash Rent Survey. The average price for average quality land was $11,210, up 5.8 percent from $10,598. For poor quality land, the average price was $8,689, up 0.7 percent from $8,631.
In the 2022 survey, farmland values rose nearly 31 percent over 2021 for top quality land, 30.1 percent for average quality, and 34 percent for poor quality.
Todd H. Kuethe, the report’s author, associate professor and Schrader endowed chair in farmland economics at Purdue, said the growth this year was more in line with rates seen over a longer period of time.
“If you remember from last year, we had these record high appreciation rates across the state, similar to what was observed in Iowa and Illinois and other states,” he explained. “So things are still moving positively, but sort of at a more muted (rate). At a per acre rate, top land values are now at $13,700 and a little bit. Whenever we cross a $500 threshold, or in this case, a $1,000 threshold, people really notice that. We’re now, for average land, above $11,000 an acre.
“In most years, I think (an increase of almost $1,000 an acre for top quality land) would get people very excited, but after the huge growth we had the previous year, it doesn’t seem quite as shocking. But it’s still a pretty robust growth.”
Kuethe said he wasn’t surprised the value of poor quality land essentially held steady. In conversations he had with people involved in the land market around the Corn Belt, Kuethe said there wasn’t as much appetite for the lower quality land, in part, because there was a belief, COVID and post-COVID times, that a lot of people were buying land, either for safe investment purpose or even to be used recreationally or to have part-time access.
“Maybe they would farm it, but they’re really buying it to hunt or to get away from people in town,” he pointed out. “And so that diminished a bit, I think, in terms of the demand. And when there’s a lot of uncertainty, like we’ve had over the last couple of years, there’s always a flight to safety, right? We tend to see higher growth at higher values of assets than at the lower end.”
Central Indiana saw the highest average values per acre in the three quality categories. Top quality land in the region was $14,852, up 12.9 percent; average land, at $12,576, rose 11.5 percent; and poor quality land was up 4.2 percent, to $9,657.
James Mintert, director of the Purdue Center for Commercial Agriculture, said he was surprised at the values for top quality land in the southwest versus southeast.
“For example, top quality land southwest, which is going to be pretty high productivity, $12,857, almost $13,000,” he said “Southeast top quality land, which typically would be would be lower productivity than southwest, reported average of $12,200. So a discount of only about $640 an acre.
“When I visit with people in southeast Indiana and talk to them about farmland values, one of the things they point out is the tremendous amount of urban pressure. Not so much to build houses, but people coming from urban areas to purchase that rural piece of property. And I hear about that in that part of the state probably more than anywhere else.”
The survey was done in June for the prior 12 months. Respondents included farm managers, rural appraisers and agricultural lenders. The survey categorizes farmland as top, average or poor, depending on productivity. The values are all for tillable, bare land. The survey was released in August.
Survey respondents were asked to evaluate 10 market forces that might influence farmland values, including current net farm income, crop price level and outlook, current and expected interest rates, and the country’s inflation rate. Nine of the 10 factors placed upward pressure on farmland prices, according to the report.
“So the big takeaway I think here is that the only large negative pressure is the rising of interest rates,” Kuethe said. “The cost of borrowing or the expenses of farm mortgages. If we rewind three years ago, in 2021, the respondents suggested everything that could put pressure on land values was putting positive pressure.
“And then in 2022, we have this record high appreciation rate. I think a lot of that has to do with the positive pressure that was going the year before. In 2022, interest rates start to give some negative pressure. And then in 2023, that negative pressure’s more intense.”
The average value of transitional land statewide was $25,228 per acre, up 4.1 percent from last year’s $24,240. Recreational land averaged $8,170, down 10.4 percent from $9,121.
Respondents projected the value of Hoosier farmland will decrease through the end of the year – a 0.7 percent drop for top quality, 2.1 percent for average quality and 0.6 percent for poor quality.
Cash rents statewide this year were up over 2022, though some areas saw declines in rents. Statewide, cash rents for top quality land averaged $306 per acre, up from $300 last year. For average quality land, rents were $257, up from $252. Rents for poor land averaged $212, up from $207.