WEST LAFAYETTE, Ind. — Last year’s drought did little to
slow the pace of rising farmland values and cash rents. They are up this year in
a big way again, according to a Purdue University study.
Drought last year sent corn and soybean prices soaring to
all-time highs, which, along with crop insurance indemnities, meant
better-than-expected farm incomes.
High net farm income, low interest rates and high farmland
demand with limited supply combined to push the state’s land values upward by
anywhere from 14.7 to 19.1 percent, depending on productivity. Statewide cash
rents increased by 9.4 to 10.9 percent.
“While the 2012 Indiana crop suffered from the worst drought
since 1988, the increase in farmland values did not bother to slow down,” said
Craig Dobbins, Purdue Extension agricultural economist.
The biggest increases were in high-productivity land, which
jumped by 19.1 percent to $9,177 per acre. Average-productivity land increased
17.1 percent to $7,446 per acre, and poor-productivity land was up by 14.7
percent to $5,750 per acre.
Land values, cash rents and farmland productivity were
estimated for the study by surveying Indiana rural appraisers, agricultural loan
officers, Farm Service Agency personnel, farm managers and farmers.
The 261 respondents were asked to estimate long-term corn
yields for poor, average and top-quality land. The state’s average long-term
corn yields for poor, average and top-quality land were 127, 160 and 193 bushels
per acre, respectively
Another area that saw growth is the transitional land
market, Dobbins said.
“The transitional land market — that is, farmland moving out
of agriculture — seems to have sprung back to life,” he said. “This is a
specialized market, with transitional land value strongly influenced by the
planned use and location.”
Overall, the survey showed a 24.4 percent increase in
average transitional land value, up to $10,581 per acre. However, the estimated
values from the 2013 survey varied widely — from $2,500 to $45,000 per acre. The
median value was $9,500 per acre — $1,500 per acre more than in 2012.
“Because of the wide variation in transitional land values,
the median value might give a more meaningful picture than the average,” Dobbins
Cash rents increased statewide, with the largest jump found
in high-productivity land. Top-quality land increased by 10.9 percent or $29 per
acre. Rent for average-quality land was up by 10.1 percent, or $21 per acre, and
rent for poor-quality land was up 9.4 percent, or $15 per acre.
The survey also assessed expectations for where farmland
values and cash rents are headed in the future. Dobbins said the consensus is
that increases will slow and, in some regions, values might stall or decline
Forty-three percent of the survey participants said they
thought farmland values would increase by an average 11.7 percent over the next
five years. That means they expect an average annual increase of 2.2
Thirty-five percent of the respondents thought farmland
values would decline by an average of 12.3 percent over the next five years — an
annual decline of 2.3 percent.
The remaining 22 percent expected no change.