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Recent survey shows Indiana land prices continue to climb

Craig Dobbins says it doesn’t take a rocket scientist to guess which way Indiana land prices are headed. Farmland values are likely to continue rising, but probably at a slower pace.

The recent annual survey conducted by the Purdue University Extension ag economist found extremely sharp increases for farmland statewide over one year earlier. The statewide increase in land value ranged from 22.8% to 25.3%.

“We haven’t seen those kinds of increases since the 1970s,” Dobbins says. Strong crop prices fueled increasing land values in the ’70s, and it is a major factor now.

Average-quality farmland was pegged at $5,468 per acre. Top-quality land was valued at $6,521, and even poor-quality land was estimated at $4,388. Poor-quality land actually showed the biggest increase from last year, topping out at 25.3%.

Key Points

Indiana land values skyrocketed in 2011 vs. 2010.

Industry expects land values to increase more, but at much slower pace.

Farmers play a large role in the market, but investors play important roles, too.

Ironically, when placed on a cost per bushel of expected yield basis, values are within a quarter of each other. The cost of land per bushel of corn for poor-, average- and top-quality land is $34.89, $34.87 and $34.64, respectively.

Future trend

A majority of the respondents, made up of bankers and farm managers, believe farmland values will continue increasing over the next five years, but at a more modest pace. Among those that expect land values to increase, their average guess is a 12% rise in five years, or just over 2% per year.

In fact, most believe the increase will be sharply lower during the rest of 2011. Investors are a key player in the land market. “We expect investors will stay interested,” Dobbins says. “With more volatility in other parts of the economy, investors will still look at land as an asset.”

This article published in the September, 2011 edition of INDIANA PRAIRIE FARMER.

All rights reserved. Copyright Farm Progress Cos. 2011.