Despite the pandemic, farmland values soared to record highs in Indiana, up by as much as 14 percent this year, according to agricultural professionals surveyed by Purdue University. “Surprisingly, many of the current economic forces put upward pressure on farmland prices,” said Purdue on Tuesday.
Respondents pointed to the combination of a small amount of land for sale, interest among investors, high commodity prices, low interest rates, cash-flush farmers, a flood of government assistance, and fears of rising interest rates and adverse changes in tax policy.
“Statewide, top quality farmland averaged $9,785 per acre, up 14.1 percent from June 2020,” said Purdue economist Todd Kuethe. Average farmland rose 12.5 percent in value and poor-quality land was up by 12.1 percent. “Across all land quality classes, 2021 per acre farmland prices exceeded the previous record set in 2014.”
Two weeks ago, Iowa State University reported a more than 20 percent increase this spring in the auction price for 85 percent tillable ground, to $9,956 an acre. “Low interest rates, strong government payments, surging agricultural exports, and concerns about drought are behind the rise over the past six months,” said ISU. It said increases of 10 percent in farmland values were common in Midwestern states.
The bankers, farm managers, appraisers, brokers, farmers and USDA county office directors taking part in the Indiana survey were optimistic of strong land values for the rest of this year while aware of challenges on the horizon, including uncertainties about tax, land use and farm policy. “Thus, while many farmland market participants are encouraged by the growth in land values in the first half of 2021, most recognize that the combination of economic forces driving current farmland price growth are not likely to remain for the long term,” wrote Kuethe.