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Farmland prices continue to surge

Farmland prices continue to soar across much of the Corn Belt, with Indiana values hitting a record high level in 2022.

Todd Kuethe an ag economist at Purdue University says there are multiple factors contributing to the rise in farmland values.  “Things like agricultural prices, the amount of liquidity farmers have – so how much cash they have to purchase land,” he says.  “And also, what kind of mortgage rates are they paying and what are the returns on these other investments, and they can potentially do with their money.”

And, he tells Brownfield with the exception of rising interest rates, the ag economy is signaling now is a good time to purchase farmland.

Kuethe says the recent Purdue Farmland Values and Cash Rents Survey suggests Indiana farmland prices hit a record high in 2022.  “The biggest take-a-way is that from 2021 to 2022 prices went up by around 30% around the state,” he says.  “And it’s the largest growth seen since the survey began in the mid-1970’s.” Statewide, top-quality farmland averaged $12,808 per acre, up 30.9% from the same time last year. The average per acre price of average-quality farmland similarly increased by 30.1% to $10,598. Poor quality farmland prices exhibited the largest increase of 34.0% to $8,631.

He says cash rental rates in Indiana rose, but grew at a slower rate than market prices. “To justify higher land values, we’ll need to get higher returns,” he says.  “We would expect to see in a rising interest rate environment, either growth in cash rents or decline in the land-value overall.”

A report from the Federal Reserve Bank of Chicago, released Thursday, shows farmland values in the district rose by 22% in the second quarter of 2022.  The district includes all of Iowa, most of Illinois, Indiana, Michigan, and Wisconsin.  David Oppedahl, senior business economist says non-farmer buyers contributed to the rise in farmland values.

AUDIO: Todd Kuethe, Purdue University

For a more in-depth analysis of the survey, the Purdue Center for Commercial Agriculture will host a free webinar 1-2 p.m. ET August 24, 2022. Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier will break down the Purdue Farmland Values Survey and USDA Land Values report, discuss marketing strategies for 2022 corn and soybean crops, and make projections for 2023 corn and soybean returns. Register HERE.