INDIANAPOLIS — It is a tradition for Chris Hurt to give an agricultural outlook at the Indiana-Illinois Farm and Outdoor Power Equipment Show. This year, his report focused on the potential changes in agriculture in 2014.

Hurt, Purdue Extension agricultural economist, said that 2014 is a turning point for land values. Among the factors that will affect land values are interest rates, tightening margins and commodity prices, he said.

“The expectation is that interest rates will go higher, and that would tend to lower land values,” the economist said.

“If you run these numbers through a model, I’d say we’ll see 15 to 25 percent lower prices on land over the next three to five years, if these kinds of conditions prevail.”

While it is likely that land values will go down, it is not likely that it will happen overnight, he said. For the past three years land values have shot up 70 percent.

This type of growth will stabilize over the next few years.

Hurt expects the first thing to happen will be for the rate of increase to level off.

“That’s where we think 2014 is at,” he said. “It’s a year where people are really rethinking. They are saying, ‘Is corn going to stay $4.50 (per bushel)?’”

If corn prices stay low, Hurt said, land prices will drop. However if corn prices go up to $5, land values can be maintained.

Because of the many variables, landowners will not be quick to make drastic changes.

“Right now, we have plenty of people that are willing to buy at good, solid bids,” Hurt said.

“I think 2014 will level off and then, in 2015 and 2016, if we’re $4.50 or lower on corn, $11 or lower on beans, land values will come down.

“This is a transition year. We’re getting to, what the markets are telling us are, some new realities. Realities of moderation, not of collapse, but moderation. Causing us to drive our costs lower.”

He said that cash rent probably will follow suit with land value.

“As we look at those, we’re taking $50, $60, $70 lower returns or more for cash-rent tenants,” he said. “But when they go to negotiate lower cash rents, landlords are going to pull and say, ‘No, I’ll rent it to somebody else.’”

Because landlords have been in a strong financial situation over the past few years, they likely will hold to current prices. But if corn prices don’t go up, Hurt said, moderation in cash-rent prices will have to take place.

“A year from now, we will back here and be able to say if we are going to go to that 15 to 25 percent (decrease in land values) or have things changed enough that we can hold steady,” he said.