WEST LAFAYETTE, Ind. – Hoosier farmland values rose from June 2019 to June 2020, but most of the increase was concentrated in the first six months of the period, according to a recent Purdue University survey.

Top-quality land was $8,579 per acre, up 4.5 percent from $8,212. Average land increased 3.2 percent, from $7,011 last year to $7,236. Poor land was up 6.3 percent, from $5,405 to $5,746. The annual farmland values report was released in July.

Looking at the first half of the period, the survey found values increased 5.5 percent for top-quality land from June 2019-December 2019; 5 percent for average land and 8.7 percent for poor. From December 2019-June 2020, values fell 1 percent for top quality, 1.7 percent for average and 2.2 percent for poor.

“What we saw is a really interesting pattern,” noted Todd Kuethe, associate professor and Schrader endowed chair of farmland economics at Purdue. “Prices had been rising. Most of the gains were made in the second half of 2019. Since December, the prices have declined a bit.”

Purdue’s survey was done in June for the prior 12 months. Respondents included farm managers, rural appraisers and agricultural lenders. The survey categorizes farmland as top, average or poor, depending on productivity. The values are all for tillable, bare land.

Many survey respondents mentioned concerns over the coronavirus pandemic, not just in prices but in regard to the food system in general, Kuethe said.

Jim Mintert, director of Purdue’s Center for Commercial Agriculture, said some analysts anticipated seeing differences in prices between the first and second halves of the period.

“It was no surprise, given what’s happened with respect to COVID-19,” he explained. “The impact that’s had on agricultural prices in general, obviously you would think there would be some negative impact there.”

Cash rents also increased from June to June. For top-quality land, rents rose 4 percent, from $249 per acre to $259. Average land rents were up 4.8 percent, from $207 to $217, and poor land jumped 5.4 percent, from $166 to $175.

The survey asked respondents what they considered to be positive and negative influences on farmland values. Positive impacts were low interest rates, low returns on alternative investments, limited supply of land on the market and inflation. Negative impacts were low crop and livestock prices, low net returns and poor liquidity.

Michael Langemeier, associate director of the center, said he thinks the positives outweigh the negatives. “That doesn’t mean we’re going to see double-digit increases in farmland values by any means, but I think there’s certainly enough on the positive side to suggest stable to slightly higher land prices, even with those low net returns.”

Mintert agreed. To the extent that low interest rates, low returns on alternative investments and limited supply of farmland remain true, he said, “It’s going to be pretty supportive of land values either staying constant or maybe a little bit higher.”

Kuethe said he thinks prices will remain where they are. “I think we’re in a place where I can see prices sort of going up or down by 1 or 2 percent. Anything more than that would surprise me either way, which averages out to about zero. I think they will hold relatively flat.”

R.D. Schrader, president of Schrader Real Estate & Auction Co., said generally speaking, there was some additional strength in the land market from June to June. Demand is good and there’s not a lot of inventory, he noted. Low interest rates are making it less expensive to borrow money, Schrader added.

“When people look at alternative things to do with their money as far as returns on their money, they start to push toward land. If it’s a nice, safe place to put (their money), they’ll take it. That safe place becomes more critical during a time like this. They want to put their money where they know it won’t disappear on them. A lot of people perceive land as a safe investment.”

Potential sellers may be holding off putting their land up for sale during the pandemic, he said. “For the near term, demand looks to be very strong. The amount of cash looking to be invested in farmland looks to be very strong. Looking further out, how you draw the line from the near term to past the near term, I don’t have a crystal ball to draw that line.”

John Kurtz, president of Kurtz Auction & Realty Co., said he anticipates land prices staying steady, though they might be a little soft in the last quarter of this year. “I’m mildly bullish about land prices,” he noted. “I think the market will deliver a fairly good representation of market prices. The land will bring what it’s worth.”

Before the pandemic, land values were kept from falling by commodity prices and non-producers looking at land as an opportunity, Kurtz said. Going into the pandemic-related shutdowns, demand was equally paced with supply, he said. As the year has gone on, demand has been outpacing supply.

“Most of the people who buy land are still buying land,” Kurtz explained. “I like the velocity of land transactions. I like to see buyers get what they want and I like to see sellers get what they want. Going into the first quarter of 2021, I think you’ll see some potential sellers thinking they’ve got to sell. They’ll want to get it on the market before planting starts.”