WEST LAFAYETTE, Ind. — Trends for farmland value prices have shown an increase over the past few decades. But, according to an economist at Purdue University, future values may begin to go down.

Craig Dobbins, professor of agricultural economics at Purdue University, discussed trends in land values at the recent Top Farmer Crop Workshop.

After a spike in land prices in the ‘70s, land values went down dramatically.

“We hit bottom again, and we’ve been going up ever since,” Dobbins said. “Now people are wondering, ‘Are we getting ready to have another big correction?’”

He said that land values tend to go up for a series of years, pause and then have a modest correction. Once the market corrects itself, prices begin climbing upward again.

Historically, 57 percent of the time land value prices are going up between zero and 10 percent. About 13 percent of the time, there is a small correction and it goes down. More rarely, there is a larger correction.

“Farmland values in Indiana have been going up over the past 100 years at about 4.6 percent a year,” Dobbins said. “We got a little carried away in the ‘70s and had to correct things.

“The question is: Are we getting carried away again? But if you look at that curve, on percentage terms, we were quite a bit further away from the trend line in the ‘70s than we are today.”

An annual land value survey shows that there are 11 drivers of that market. Surveys from 2011 and 2012 showed that the most important drivers were interest rates, competing investments and net income.

“About the only thing that’s not really helping support farmland values are government programs and livestock,” the professor said. “But even those are positive.”

Farmland values have been rising more rapidly in the last few years than they were in 2002 and 2003, Dobbins said.

Another important measure of values is cash rent. Indiana’s cash rent statistics show that income has been going up at about 4 percent, from $30 to $175, from 1967 to 2012.

What people expect to unfold in the future in the land market has a big influence on what might happen, as well, Dobbins said, especially when the market is thin.

“The trends are saying things are going to tighten up,” he said. “So it would seem to me that current land values are not totally out of whack. It seems to me that future markets are going to be smaller, interest rates are going to small and income growth is going to be lower than it has been in the past.

“All of those are going to be headwinds into the increased land values. It’s going to be more difficult for land values to go up, so I think the era of seeing increases of 20 percent plus are coming to an end quickly.”

Dobbins emphasized that people’s expectations will play an important role in future prices.

“As they begin to recalibrate about what the future may be, whether we’ll be having a grand optimistic future, they may become a little bit more pessimistic — we may, indeed, see a downward direction in land values,” he said. “It seems to me it could be bigger than what we’ve seen in the past in terms of downward correction.”