Grain prices, demand pushing Indiana farmland values higher
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A policy advisor and longtime business economist for the Seventh Federal Reserve Bank in Chicago says Indiana’s soaring farmland values are mostly due to improving grain prices, but he says values are also playing catch up in the Indiana market. David Oppedahl is author of the Chicago Fed’s quarterly Agricultural Letter, which tracks farmland values and credit conditions. The third quarter report shows the value of good quality Indiana crop land is 29% higher than the same period a year ago.
“I think the biggest factor for farmland values in Indiana is that they’re seeing the large gains in revenues for corn and soybeans,” said Oppedahl in an interview with Inside INdiana Business. “Even though inputs costs have gone up some as well, it’s still a pretty favorable year, generally.”
According to the Chicago Fed, the price of corn in September was 2% lower than in August, but still 30% higher than a year ago. Likewise, Oppedahl says the price of soybeans in September was 8% lower than in August, but 16% higher than a year earlier.
Oppedahl says Indiana is playing catch-up to other big corn producing states in the Midwest, namely Illinois and Iowa.
“Indiana had seen little smaller increases in the first part of the year relative to say, Iowa,” Oppedahl explained. “Illinois is kind of in the middle there between those two and their farmland values have traditionally been higher. And so, Indiana with a little bit lower farmland values, there might be somewhat of a catch up mechanic in there.”
LISTEN: In an interview with Inside INdiana Business reporter Wes Mills, Oppedahl says Indiana saw slightly smaller gains in early 2022.
Indiana had the biggest year-over-year increase throughout the Chicago Fed’s Midwest region, which includes all or part of Indiana, Illinois, Iowa, Michigan and Wisconsin.
Districtwide, farmland values climbed 20% in the third quarter of 2022 from a year ago.
In August, the Purdue Farmland Value and Cash Rents Survey showed Indiana farmland prices grew at a record pace between June 2021 and June 2022, exceeding previous highs set in 2021. Statewide, top-quality farmland averaged $12,808 per acre, up nearly 31% from the same time last year.
“Multiple factors are influencing the increase in farmland prices, including positive net farm incomes, relatively strong commodity prices, inflation, and high farmer liquidity,” said Todd Kuethe, Purdue Associate Professor of Farmland Economics Todd Kuethe said in the August news release.
Oppedahl says farmers are acquiring land to grow their operations, but they often compete against outside investors who are looking for hedge on inflation.
“It’s still a period where both farmers and non-farmers have a higher level of interest in buying farmland, even at these high prices. And I think that’s helped to maintain some of this momentum,” said Oppedahl. And maybe a tad more on the investor side, because…after seeing such strong gains and struggles in other investment vehicles. So now they’re like, ‘Oh, we should really look into farmland.’”
The report is based on survey responses from with approximately 160 bankers throughout the five-state region that serve a farming clientele.
Oppedahl says 25% of the bankers surveyed expect district farmland values will go up again in the fourth quarter of this year, 7% expect them to go down, and about two-thirds of the respondents say prices will remain stable.
“There definitely seems to be some feeling that there will be a continuation of the rise in farmland values. The majority are saying no change… that we’ll see more stable farmland values, but there’s still more that see rising and falling farmland values,” said Oppedahl “It’s not as likely to continue to see these outsized gains, but certainly still some momentum upward.”