By MICHELE F. MIHALJEVICH

Indiana Correspondent

WEST LAFAYETTE, Ind. — The value of top-quality farmland in Indiana dropped 5.3 percent over the past year, while values for average and poor land also declined, a recent Purdue University survey found.

Top-quality land was $8,212 an acre, down from $8,668. Average land fell from $7,072 last year to $7,011, while poor land dipped from $5,407 to $5,405. The annual farmland values report was released in early August.

Average cash rents also declined during the period. Rents fell 1.2-4.6 percent statewide, depending on the type of farmland.

“What an adventure 2019 has been,” said Craig Dobbins, a Purdue professor of agricultural economics and the report’s author. “After many unexpected events during the first half of the year, I’m hoping for something more normal during the second half of 2019. Who would have thought corn and soybean planting would extend into late June?”

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

Respondents evaluated several factors that may have positive or negative influences on farmland values, including current net farm income, outlooks for crop prices and U.S. agricultural export sales, and current and expected interest rates. Inflation and interest rates were considered positives, while net income, exports, and ag policy were among the negatives.

“Given the continued low grain prices and net farm income over the period of 2017, 2018, and 2019, it is not surprising respondents placed a negative influence on net farm income, expected growth in returns, crop prices, and livestock prices,” Dobbins said. “Respondents have become less negative about each of these items, but all continue to be negative.

“The one item that had an increased negative influence was the outlook for agricultural exports. The quick resolution of trade issues with China and others has not occurred and this government policy change is resulting in an increasing negative influence.”

The highest-valued land in the state is in the west-central region, where top-quality farmland was $9,178, down 2.9 percent from June 2018. Average land rose 0.5 percent to $7,851. Poor land was $6,318, up 1.2 percent.

The lowest-valued land was in the southeast. Top-quality land was $5,900, down 13.6 percent; average was $4,600, down $15.6 percent; and poor was $3,268, down 14.7 percent.

Statewide, the value of transition land – that moving out of production agriculture into other uses – was up 0.6 percent, to $13,245. Recreation land rose 3.7 percent, to $3,673.

R.D. Schrader, president of Schrader Real Estate & Auction Co., said moving forward he expects the market to stay at a steady to slightly-off pace.

“There’s still some optimism out there in the market,” he noted. “If the trade issues get worked out, that would be good for the upside. There’s still a lot of money looking to be invested, but not as much as five, six years ago.”

The land market continues to be tight, Schrader pointed out. “The next few months will be an interesting tell. With reduced incomes, fewer operators are chasing land today. What money is out there is focusing on better-quality land. When operators back off because of income, it’s an opportunity for investors to buy. They tend to focus more on higher-quality land.”

The sales results for Halderman Farm Management and Halderman Real Estate Services show a pretty steady year, said Howard Halderman, company president.

“From May on, not much has been selling at all,” he explained. “We were up a lot in acres the first quarter because of bigger sales. There are still investors. I have four, five, six interested in buying land. There still seems to be demand out there to buy land.”

The August 12 crop production report from the USDA may influence land values the rest of the year, Halderman speculated. “If the report had generated corn prices over $4, I would think (values) would be flat or go up. But with the report, there’s the potential for values to go down 2 to 3 percent. The jury is still out on where land values will go this fall.”

Cash rents were $249 an acre for top farmland, down from $261 last year. Rents on average land fell $3, to $207, while poor land declined $2, to $166. The highest rents were in west-central Indiana. Rents for top land were $284, average $241, and poor $195.

The lowest rents were in southeastern Indiana. Top land was $189, average $151, and poor $116. Each category was down in west-central Indiana and up in the southeast.

A recent USDA report showed the average value of Hoosier cropland was $6,210 an acre for 2019, unchanged from last year. Nationally, cropland averaged $4,100, up $50 from 2018.

Illinois cropland was $7,300, up 0.3 percent; Iowa, $7,260, down 0.4 percent; Kentucky, $4,300, up 1.2 percent; Michigan, $4,500, down 0.2 percent; Ohio, $6,400, up 1.3 percent; and Tennessee, $3,910, up 2.1 percent.

The Federal Reserve Bank of Chicago reported that farmland values in the Seventh Federal Reserve District dropped 1 percent in the second quarter from the same period a year ago. The district includes all of Iowa and parts of Illinois, Indiana, and Michigan.

Values in Iowa fell 2 percent, while those in Illinois and Indiana were unchanged. There was an insufficient response from Michigan bankers to report a change in values.