WEST LAFAYETTE, Ind. – The record rise in Hoosier farmland values over the past year didn’t come as a surprise to those who monitor sales of farmland in the state.

The average price per acre for top quality land was $12,808 in June 2022, up nearly 31 percent from June 2021, when it was $9,785, according to the annual Indiana Farmland Value and Cash Rent Survey from Purdue University. The average price for average quality land was $10,598, up 30.1 percent from $8,144. For poor quality land, the average price was $8,631, up 34 percent from $6,441.

For all quality grades, farmland prices exceeded the previous highs set last year, said Todd H. Kuethe, the report’s author, associate professor and Schrader endowed chair in farmland economics at Purdue.

R.D. Schrader, president of Schrader Real Estate and Auction Co., was a respondent to the survey. The report “is pretty consistent with the numbers I submitted,” he noted. “The market has been extremely strong. Day to day, we’re seeing hardcore evidence of the strength of the market.”

A mid-August auction of about 1,120 acres in Union and Wayne counties conducted by Schrader’s brought in $18.6 million, he said. One piece sold for more than $19,500 an acre.

“Incomes have been strong,” Schrader explained. “A lot of cash from operators and investors continues to look for a home. If commodity prices come down, that could change. There’s been some debate on whether we’re entering into a recession. As the economy changes, that could impact the amount of cash available.”

Halderman Real Estate & Farm Management has seen 30-40 percent increases in land prices over the past year, said Howard Halderman, the company’s president and CEO. “We’ve seen a phenomenal amount of change, starting about a year ago,” he said. “In August (2021), something changed in this market. We were expecting a reasonable crop, combined with much higher commodity prices.”

To illustrate that change, Halderman said 18 percent of the company’s sales from January through June 2021 saw prices of more than $10,000 an acre. During the second half of the year, 88 percent of sales garnered more than $10,000.

“The 30 percent increase (in the Purdue report), when you go across the entire state, it’s pretty fair.,” he said.

Kuethe said he had seen land value surveys from other states showing increases, so he was prepared for Indiana’s numbers to be up, but noted he was still surprised by the level of the increase.

“My first reaction was to go through the data to be sure I didn’t make a mistake,” he said. “Last year was a record high, but when you control for inflation, prices weren’t as high as in 2014. But this year, they’re both the highest when you control for inflation and in the raw prices.

“We have really good commodity prices, good production, good exports and a lot of liquidity,” Kuethe pointed out. “The downside is the cost of borrowing has increased. That brings downward price pressure there.”

Survey respondents were asked to evaluate 10 market forces that might influence farmland values, including current net farm income, crop price level and outlook, current and expected interest rates, and the country’s inflation rate. Nine of the 10 factors placed upward pressure on farmland prices, according to the report. The only negative influence was interest rates.

The 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. The survey was released Aug. 10.

The highest average top quality land value was $13,825 per acre in southwestern Indiana. The highest average quality was $11,278 in central Indiana, and the highest poor quality was $9,418 in the northeast.

Cash rents were up over the period, though not at the same rate as farmland prices. Rents statewide for top quality land averaged $300 per acre, up from $269. For average quality land, rents were $252, up from $227. For poor land, rents were $207, up from $183. Rents were highest in west central Indiana, averaging $329 for top quality land, $289 for average and $247 for poor.

The average value of transitional land increased 36.5 percent, to $24,240 an acre, while recreational land averaged $9,121, up nearly 22 percent.

“Transitional land is going into subdivisions, so that’s not a surprise,” Halderman said. “I was surprised recreational land increased so much. That’s enjoyment land for four-wheeling and hunting.”

Interest rates have helped to cool the housing market a bit, Schrader said, adding he expects that to impact the value of transitional land.

“The price of recreational land is a reflection of very good incomes,” he noted. “When there’s a lot of money in the economy, more of it becomes discretionary money. It buys property to use for hunting and other outdoor activities.”

The survey’s respondents expect prices to increase statewide by 1.1 to 2.7 percent through the end of the year. Halderman expects growth of 0-5 percent. He cited good yields, income and prices as positives, while calling interest rates combined with input costs negatives. Schrader said he doesn’t expect to see continued appreciation of values at the same rates of the last couple of years.

USDA land values

The USDA’s National Agricultural Statistics Service has released its land values summary. Nationwide, the average value of cropland rose from $4,420 per acre last year to $5,050 this year. The agency defines cropland as land used for growing field crops, vegetables and hay. Land that rotates between pasture and crops is also included.

Illinois cropland averaged $8,950 per acre, up from $7,900; Indiana, $7,750, up from $6,800; Iowa, $9,350, up from $7,810; Kentucky, $5,000, up from $4,510; Michigan, $5,300, up from $4,700; Ohio, $7,550, up from $6,800; and Tennessee, $4,550, up from $4,130.