Indiana farmland values stay strong
The smart money said land values would drop in mid-2010. That’s not what a midsummer Purdue University Land Survey found, and it’s not what recent sales results show. Nevertheless, a poll of bankers and farm managers expects softening of land prices through fall, although it projects land will be higher five years from now than today.
Craig Dobbins, Purdue ag economist, reports that instead of a dip, the 2010 June survey found a strong increase. Statewide, cropland ranged from $3,501 per acre for poor land to $5,310 for top-quality land. Land of average quality weighed in at $4,419.
Those numbers represent increases in all three categories since June 2009. Increases for poor, average and top-quality land were 6.3%, 5.5% and 4.5%, respectively. The rebound in poorer land was a surprise to some.
• An expected dip in farmland prices in mid-2010 didn’t materialize.
• Poor-quality land had higher percentage increases than top-quality land.
• Local land sales through August drew aggressive bidding, strong prices.
One way purists estimate land value is by soil productivity. Average reported yields for poor, average and high-quality land, respectively, were 121, 155 and 187 bushels per acre. When average land value was divided by average corn yield, the result was almost identical when figured as value per bushel. The numbers for poor, average and top land, respectively, were $28.93, $28.56 and $28.41 per bushel of corn.
The only land showing a decrease in value was transitional land, defined as land waiting to go into some other use, and recreational land. Last year was the third straight year of declining value of transitional land, Dobbins notes. The average value was down 5.3%. However, values are so variable that the mid-range number may be more meaningful. The median value was $7,000, the same as 2009.
The story for recreational land is similar. Down 14.6% from 2009 at $2,949 per acre, the median in 2010 was $2,800, compared to $3,000 in 2009.
But for cropland, the only reported decline in any area was poor-quality land in southeast Indiana, down 6.3%. Even there, top-quality land increased 2.5% and average land held steady.
What realtors say
Aggressive bidding and capacity crowds convince realtors there’s still demand for land. Purdue’s numbers also show there’s slightly less land available than there was a year ago.
“Land values leveled out during 2009 due to the financial crisis and declining commodity prices,” says Howard Halderman, Halderman Real Estate Services, Wabash. “However, we see renewed strong demand for farmland in 2010 from farmers as well as investor landowners.”
Halderman says the highest farmland sale ever recorded in Wabash County came in August. He believes that since input prices have returned to traditional levels and yields are expected to be above average, with commodity prices still at historically appealing levels, there will continue to be demand for farmland.
He notes that farmland has survived the financial crisis so far with little, if any, decline in overall value.
This article published in the October, 2010 edition of INDIANA PRAIRIE FARMER.