WEST LAFAYETTE, Ind. — The average value of top-quality farmland in Indiana increased slightly over the past 12 months, but other categories saw declines, according to the latest Purdue University Farmland Value Survey.

 

Values for the state’s top-quality land rose 0.2 percent from $8,508 in June 2016 to $8,529 in June 2017. Average land fell 1.6 percent, from $7,041 to $6,928, and poor land dipped 1.4 percent from $5,353 to $5,280.

The rate of decline was smaller than the previous year, when top and average land dropped 8.2 percent while poor-quality land was down 8.7 percent.

Net income and interest rates are two influences on land values, said Michael Langemeier, associate director of Purdue’s Center for Commercial Agriculture. “Crop prices are one factor causing downward pressure on land values,” he explained.

“Interest rates have been a positive (on values), and even though rates are still relatively low, they’re not quite as positive as they have been in the past.”

The state’s land values have declined 13-14 percent since they peaked in 2014, and Langemeier expects a drop of closer to 20-25 percent before the trend reverses.

“I’m not trying to be Dr. Doom here, but we’re seeing very tight margins and very low earnings for corn,” he noted.

Purdue’s survey was done in June, for the previous 12 months. Respondents included farm managers, rural appraisers and agricultural loan officers. The report was released earlier this month. The survey categorizes farmland as top, average or poor, depending on productivity, location and other factors. The values are all for tillable, bare land.

Southeastern Indiana – where land values are the lowest – saw the only increases in all three categories. Top-quality land was up 6.2 percent to $6,038; average, up 8.3 percent to $4,811; and poor, up 5.8 percent to $3,550.

 

The biggest drops in values were found for some land in southwestern Indiana.

Top-quality land dipped 1.4 percent to $8,984. Average land fell 10.6 percent to $6,271. Poor land dropped 14.5 percent  to $3,982. The larger drops in the southwest were in part attributed to depressed corn yields due to disease pressure, the report said.

The west-central region had the state’s highest values, despite declines of 5.8 percent, 5.4 percent and 2.1 percent for top, average and poor land. Top-quality land was $9,241; average, $7,774; and poor, $6,209.

Howard Halderman, president of Halderman Farm Management and Halderman Real Estate Services, based in Wabash, has seen a flat market from August 2016 to this month. Given the decline in values over the past few years, he noted, “To me, a flat market is a good thing.

“Land values are reflective of three things: farm income, interest rates and supply of farms. The number of farms available, if that changes, could be a big negative.”

The survey showed statewide land values were up 1.4-2.9 percent from June 2016 to December 2016 before falling after the first of the year.

“All the categories were up (in the second half of last year) probably based on the good yields we experienced last fall,” he said. “The decline since the first of the year may be based on the mentality of some guys who are seeing what their crops really look like.”

The land market continues to be tight and demand is strong, said R.D. Schrader, president of Schrader Real Estate & Auction Co., based in Columbia City.

“There’s still a lot of interest out there and still a lot of money looking to invest,” he explained. “There are Wall Street investors, very sophisticated investors, thinking long-term. There’s a lot of competition out there. There’s cash out there looking for a home in farmland.”

The type of buyer might be changing as the economic downturn continues, Schrader said. “As incomes have come down, we’ve seen a gradual shift toward investors to purchase land. When we hit the (land value) highs of a few years ago, that was driven by incomes and operators making purchases.”

Longer-term, 74 percent of respondents expected no change or an increase in values in five years. Twenty-six percent predicted an average decrease of 13.6 percent over the period.

Average cash rents for top farmland dropped 1.6 percent to $253 per acre. Rents for average land increased 0.5 percent to $205, while those for poor land rose 3.8 percent to $163. The highest cash rents – $279 – were for top-quality land in the west-central region. The lowest, at $106, were for poor land in the southeast. 

 

USDA survey data

A survey of farmers by the USDA’s National Agricultural Statistics Service found the average value of Hoosier cropland to be $6,700 an acre, down 4.3 percent from last year. Cropland is defined as land used for growing field crops, vegetables and hay. Land that rotates between pasture and crops is also included.

The average cropland value in the Corn Belt – Illinois, Indiana, Iowa, Missouri and Ohio – was $6,670, a drop of 0.6 percent from last year. Iowa had the top average land values in the Corn Belt at $8,100, a 1.3 percent increase. Missouri had the lowest average values with $3,820, a jump of 1.3 percent.

Farmers in the Corn Belt reported higher values than their counterparts nationwide. The average national cropland value was $4,090, unchanged from last year.

For other states in the region, Kentucky saw a 2.1 percent increase in value to $3,850; Michigan, a 1.1 percent drop to $4,450; and Tennessee, a 1.1 percent increase to $3,640.