Indiana farmland values growing
Farmland prices have moved upward in Indiana, proving to be a stabler alternative market for investors.
At the same time, cash rent prices have increased statewide as well. That’s good news for landowners renting their fields but not so good for the farmers paying them.
While the recently released results of Purdue University’s 2010 Indiana Farmland Value and Cash Rent Survey show land values increased between 4.5 percent and 6.3 percent statewide, the region didn’t fare as well.
No matter the soil productivity, an indicator in land prices, Northwest Indiana land values increased by less than 1 percent.
Still, an upward trend is reason for optimism, said Craig Dobbins, Purdue Extension agricultural economist.
“The stock market is still jumping all over, and no one knows what direction it is likely to go,” Dobbins said.
“The land market has been more stable, and with this renewed optimism, I think people have come back into the market.”
No matter how small the bump up in the per-acre price is locally, farmers who want to take advantage of current interest rates face favorable conditions. Banks could regard their loan requests in a better light with the increased equity the land value change would bring.
Purdue agricultural economist Chris Hurt told area farmers Thursday he expects land values will continue to grow.
“Next year looks positive: $5 to $10 higher per acre is my best guess,” he said. “It depends on your individual situation.”
The Purdue survey also showed that cash rents increased 2 percent to 2.5 percent statewide.
For the first time, cash rent for top-quality land rose more than $200 an acre to $202 an acre.
That isn’t welcome news for farmers such as Jerry and Susie Hayden in Eagle Creek Township who, with their extended family, cash rent about 85 percent of the 4,000 acres they plant.
“We’re looking at a variable cash rent (for the future),” Susie said. “In a good year, the landowner shares in it. In a not so good year, they share in that, too. Now, the farmer takes all the risk. Regardless of drought or disaster, the landowners get their money.”
Walt Sell, the Lake County Purdue Cooperative Extension director, said a variable cash rent makes sense for all parties.
“An adjustable cash rent is viable, so the landowner can share in the profit,” he said.
Sell thinks cash rent rates should be re-evaluated annually by the landowners and renters.
“Earlier is better than later because in the last quarter the tenant will be purchasing his inputs (farming expenses such as seed and fertilizer),” Sell said. “The agreement should be in writing, and it should be well-written.”
He added that verbal arrangements, a common practice, can create problems.
Susie Hayden said she and her family also have share-rented. That means the landowner shared in input costs at the beginning and in the profit after harvest.
Crown Point landowner Marie Segert still has a 50-50 share-rent arrangement with her tenant farmers. When harvest comes, she is as invested in the outcome as her renters, she said.
“They say it’ll be the best year ever. We don’t know that yet,” she said.
The survey shows, Dobbins said, that the highest cash rents continue to be in the west central and central regions of the state. There, the average cash rent for top-quality land was from $206 to $225 per acre.