Farmland values, cash rents on the up and up
The value of Indiana farmland has increased for the 15th straight year, according to the annual Purdue University Land Values Survey.
Craig Dobbins, a professor of agricultural economics, said the survey results were different than he expected.
"I was surprised by the strength of the increase," Dobbins said. "Last year was not a good production year in much of Indiana, so I was a little surprised that land values went up as much as they did, and certainly that rents increased as much as they did."
The survey reflects the opinions of almost 350 land brokers, loan officers, farm managers and others. The entire report is available online at http://www.agecon.purdue.edu/extension/pubs/paer/August2003/landvalues.asp.
Dobbins said estimated farmland values in Indiana ranged from $3,336 per acre for top farmland to $1,966 per acre for poor land. Average farmland had an estimated value of $2,509 per acre. Farmland values increased by approximately 5 percent across the state during the survey year, which ran from June 2002 to June 2003.
Cash rents went much the same direction as land values, increasing by $2 to $4 per acre statewide. Estimated cash rent for top farmland was $147 per acre. Rents were estimated at $120 per acre for average land and $93 an acre for poor land.
Several factors influenced farmland prices. Dobbins said the supply of land on the market, the number of buyers interested in purchasing farmland and expectations of grain prices, interest rates and the rate of inflation all played a part in determining farmland value.
According to the survey, even though the amount of farmland on the market is relatively the same, the demand from farmers, investment groups and individuals interested in rural residencies is strong.
"Demand from farmers seems to be increasing," Dobbins said. "And only 1 percent of the survey respondents indicated a decline in the demand for rural residencies. In addition, the survey showed the number of off-farm investors interested in farmland is increasing. All these factors add up to an increase in farmland values."
Off-farm investors are interested in the land for two reasons, Dobbins said. One is to keep the land in production and rent it to farmers, the other is to divide it into parcels for development. Which of the options they choose is largely decided by proximity to urban areas, he said.
The average value of transitional land, or land that is moving out of agricultural use, also increased, according to the survey. The average value of transitional land was $5,936 per acre, representing a 7.6 percent increase from June 2002.
"Due to the wide variation in estimates for transitional land, the median value may give a more meaningful picture to the average," Dobbins said. "The median value is the value where one-half of the observations are below the value and half of the observations are above it. For transitional land in June 2003, the median value was $5,500 per acre."
While there was a strong increase in land values statewide, there are always regional differences, Dobbins said.
"This year the strongest increase in value occurred in the southeast region," he said. "The north region also had strong increases. However, the southwest region reported decreases in land values ranging from 1.7 to 8.4 percent."
The southwest region had the distinction of being the only region of the state to report a decline in values for the entire year, Dobbins said. He attributed the southwest values to a series of weather events in past years.
Dobbins said the highest land values were in the central portion of the state, where top-quality land had an estimated value of $3,336 per acre.