Farm managers, land brokers, appraisers, and other professionals attribute a modest decline in Indiana farmland values in the first half of the year, a trend expected to continue into the winter, to disruptions accompanying the coronavirus, said Purdue University on Thursday. “The Covid-19 pandemic will be the defining economic event of 2020,” said Purdue’s annual farmland report.
“Everyone is hoping for a quick economic recovery, but the degree to which Covid-19 will impact land values is yet to be seen,” said associate professor Todd Kuethe, who oversaw the survey. “Given the disruptions across the food value chain and deep economic uncertainty, it is difficult to posit what the next year has in store for [the] Indiana farmland market.”
On average, farmland values in the state in June were higher than in June 2019, said the survey. But values for top-quality, average, and poor land have fallen by 1 to 2 percentage points since last December, with further declines expected. For example, average-quality land yielding 180 bushels an acre — similar to the USDA’s forecast of corn yields nationwide this year — was worth $7,011 an acre statewide last June, rose to $7,361 an acre in December, but then dipped to $7,236 an acre last month. It would decline again, to $7,089 by the end of 2020, in the judgment of the land professionals taking part in the survey.
Low interest rates are the greatest factor supporting land values. “At this point in time, the price of corn is immaterial — it’s all about interest rates,” said one survey respondent. The three influences that would weaken land values are farm income levels, crop prices, and livestock prices. “In each case, respondents have become more negative as market disruptions and uncertainty place downward pressure on current farmland values,” said the report.
The USDA says cropland values have softened slowly since 2015 in the five Corn Belt states of Illinois, Indiana, Iowa, Missouri, and Ohio. The average acre of cropland in the region was worth $6,360 in 2019, compared to $6,700 in 2015, according to the annual Land Values report. The 2020 report is scheduled for Aug. 6.
To read the Purdue report, click here.