Indiana farmland values have been trending upward since the mid-80's. But last year's increase nearly took the trend off the chart, heading sharply higher. If Purdue University's annual June land rent survey is accurate, it was a banner year for land values in Indiana. Cash rents also went up, but not by as much as you might expect, given the dramatic shift in commodity prices going into '07 compared to the same time a year earlier.
Craig Dobbins, Purdue ag economist, summarizes the annual survey of bankers, farm managers and others, and presented the data to farmers at Purdue's Top Farmer Crop Workshop recently.
The survey separates land into three categories: top, average and poor. Yields for the three categories were defined this year as 175 bushels per acre of corn for top land, 144 for average land, and 112 bushels per acre for poor land. Believe it or not, percentage-wise, poor land increased in value more than any other class.
In fact, poor land statewide was estimated at nearly $3,000 per acre. That was not that long ago considered a good price for top land.
Increase for top land value in the Purdue survey was 16.9%, going from $3,770 in '06 to $4,407 in '07. Average land went up 16.6%, with price per acre shifting from $3,162 to $3,668 per acre. Poor land shot up from $2,509 per acre to $2,991.
What's going on with poor land? Some real estate agents who specialize in farm land say the demand for rough land, considered and used as recreational land, remains strong. It's one possible explanation.
Long-term trend lines show that average Indiana farmland rose from $500 per acre in 1970 to $2,000 per acre in 1981, before crashing to less than $1,000 per acre in the early '80s. Then it's been a steady climb, with a slight slowdown in the late '90s, but punctuated by a steep increase last year- the steepest increase visible on the chart.
Cash rents were also up, but by smaller percentages compared to changes in land value. Rent for 175 bushel per acre land went from an average of $155 per acre to $171, according to the Purdue survey, while average land jumped from $127 to $139 dollars per acre. Those are increases of 10.3 and 9.4%, respectively. Cash rent for poor land jumped $10 per acre to $110 per acre, which is a 10% increase.
Learn more about land value trends at: www.agecon.purdue.edu.