A Purdue University survey of farm lenders, appraisers, land brokers and farm managers found that Hoosier cropland posted strong gains in value during the year that ended in June. The survey also revealed that cash rents rose in the same period but by a much smaller percentage.
Purdue's Department of Agricultural Economics conducts the survey each June.
Indiana farmland values have trended higher for about 20 consecutive years, says Craig Dobbins, a Purdue agricultural economist and survey coordinator.
"This was another year where Indiana farmland values were up fairly strong," Dobbins says. "On a statewide basis we're talking about an average increase of 6-7.5% in farmland values from June 2005 to June 2006. In spite of rising farm input costs for energy and fertilizer, and market prices for corn and soybeans that farmers just don't think are all that great, there still seems to be a very strong demand for farmland."
Those surveyed were asked to estimate the value of bare farmland and its long-term corn yield potential, Dobbins says. Land considered top quality can consistently produce 170 bu. of corn/acre. Average-quality land has an average long-term corn yield of 139 bu./acre, while poor-quality land is capable of averaging 106 bu./acre.
"We found that for top-quality land the estimated average value was $3,770/acre in June 2006," Dobbins says. "Average-quality land was valued at $3,162 and poor-quality land averaged $2,509/acre." Those values represented increases of $217/acre for average-quality land, $214/acre for top-quality land, and $142/acre for poor-quality land.
By region, land values in central and west-central Indiana counties were highest, at more than $3,400 an acre for average-quality land. Land values in southwest Indiana counties posted the highest overall average increases from 2005, at 14.3%. Only one land category lost value in the 12-month survey period – poor-quality land in the central Indiana region, which fell 0.4%.
The survey indicated that cash rents – the amount farmers pay to rent land on which to grow crops – were up slightly across the state.
The survey also found that:
* Poor-quality land is more expensive than top-quality land on a per-bushel crop basis. Poor land is valued at $23.27/bu. Conversely, top land is valued at $22.14/bu.
* Land moving out of agriculture and into such uses as development is worth 11% more, on average, than one year ago. The average per-acre value of this "transitional land" is $9,113.
* Many survey respondents believe that farmland values will continue to increase. Seventy percent said they expect farmland values to be higher in five years, with land supply and cash liquidity exerting the most influence on the market.
Purdue Land Values and Cash Rent Survey questionnaires were sent to farmland professionals in all 92 Indiana counties and completed by 313 people.A survey report, "Indiana Farmland Values Continue to Increase," appeared in the August issue of the Purdue Agricultural Economics Report. The report is available online at http://www.agecon.purdue.edu/extension/pubs/paer/.