The agricultural outlook in Indiana is marked by incremental growth in both land prices and cash rents. The findings from the 2023 Purdue Farmland Value and Cash Rents Survey provide insights into the state's agricultural economy.
Earlier discussions by industry experts at the Purdue Top Farmer Crop Workshop projected another increase in land prices for the spring. Rex Schrader of Schrader Real Estate and Auction Co. and Howard Halderman of Halderman Real Estate and Farm Management Co. predicted a 5% rise in land prices for 2023, a more tempered increase compared to the previous year.
The survey's outcomes confirm these predictions. Todd Kuethe, Schrader Endowed Chair in Farmland Economics, conducted the survey, which collected data from farm managers and bankers in June. The average price for top-selling land settled at $13,739 per acre, showing a 7.3% growth from June 2022. Average farmland prices increased by 5.8%, reaching $11,210 per acre. Poor-quality farmland saw a more modest growth of 0.7%, attaining $8,689 per acre.
Schrader and Halderman's anticipation of continued profitability in grain production contributed to their predictions. While the level of profitability may not match that of 2022, the potential for making money in grains persisted. They acknowledged the influence of rising mortgage interest rates, although its exact impact on the market remains uncertain.
Kuethe highlights that while farmland prices reached a new peak in 2023, the rate of increase was notably lower than the significant growth observed in the previous years.
The interplay between farm incomes, liquidity, and rising interest rates impacts price trends. Kuethe observes, "Higher interest rates continue to put downward pressure on purchases financed through mortgages." Consequently, farmers reliant on borrowing face constraints, while those with cash at hand maintain a strong market presence.
The cash rent scenario presents a varied picture. Kuethe explains that whether it's seen as half-full or half-empty depends on one's perspective as a landowner or tenant.
Cash rents for top-quality, average, and poor land grades surpassed previous highs set in 2013, 2014, and 2021. However, the percentage increase was modest. Top-quality land's cash rent grew by 1.99% to $306 per acre, while average land and poor land saw increases of 2.09% ($257 per acre) and 2.5% ($212 per acre), respectively.
Kuethe notes that regional variations exist, with southeastern Indiana experiencing significant rent hikes and southwest Indiana facing declines for average land. West-central Indiana maintains the highest per-acre cash rental rates.
Despite reports of exorbitant land prices in 2022, the survey indicates a more measured increase of 4.1% for transitional land, reaching $25,228. Recreational land prices declined to $8,170 per acre.
Indiana's agricultural landscape demonstrates steady progress in land prices and cash rents, reflecting the state's evolving economic dynamics.
Photo Credit: gettyimages-sizsus
Categories: Indiana, General