Indiana’s farmland prices grew at a record pace between June 2021 and June 2022. The Purdue University Farmland Value and Cash Rents Survey shows top-quality farmland in the state averaged just over $12,800 per acre, a 31 percent jump from the previous year. Todd Kuethe, an associate professor at Purdue and survey author, says the increase between 2021 and 2022 set a new record.
“It’s the record for all the years we’ve kept the survey in terms of percentage change, right? So, we’re looking at in the neighborhood of 30 to 34 percent, depending on land quality, which we were up last year as well, so we’ve been sort of gaining momentum in terms of speed. Last year was up, a bit of a surprise, and then this year up even more, but it’s not altogether surprising, right? Iowa State does a similar survey of land values there. They run theirs in the wintertime or fall. And so, last year, they were reporting Iowa land values up 29 percent. It’s sort of happening around the Corn Belt.”
Kuethe explains some of the key drivers for Indiana farmland prices.
“Things like income, farmer liquidity, the return to other investments, or anything that’ll drive the price of land values, and we ask them to rate is this a positive force, up to a plus five, or a negative force, to minus five. So, these are the averages for the last three years, and you can see a 2021, everything that could put pressure on farmland was a positive pressure. Everything said was giving signs that prices should go up, as all this stuff is positive. Fast forward to this summer 2022. Again, almost everything is positive except for the interest rates, so we’re in a rising interest rate environment that puts downward pressure on land values because we’re having to pay more in mortgage expenses or the cost of funds, which will push down the amount we’re willing to bid into the land value, so that’s the only thing pushing downward pressure this summer.”
Respondents expect the growth in cash rents to begin slowing over the next six to 12 months.
“Most people, if you said like, ‘Oh, can we get you two-and-a-half percent growth rate in a given year,’ they think that’s pretty good. But coming off of those really high growth rates, in fact, if you look at the growth rate we’ve seen across the previous survey, there was higher growth at the end of the previous year than there was at the beginning of 2022, so there’s already a sign that maybe that growth is kind of slowing or moderating. And it seems like our respondents sort of expect it to be still positive but at a slower rate.”
The average price per acre for average quality farmland was $10,598, a 31 percent increase from the prior year, while poor quality farmland had the largest rise at 34 percent to $8,631.