Purdue News

August 28, 1998 Farmland hits record value; rents fail to keep pace WEST LAFAYETTE, Ind. -- An acre of typical Indiana cropland was worth an average of $2,155 in June, $55 more than the previous all-time peak reached in 1981, according to the 1998 Purdue University Land Values Survey. The survey, done by Purdue's Department of Agricultural Economics, showed a $158-per-acre increase from June 1997 to June 1998, a gain of about 8 percent. The numbers, which represent the 11th consecutive annual increase in Indiana farmland values, are based on a poll of Hoosier farm managers, appraisers, brokers, bankers, Purdue Cooperative Extension Service educators, and others. Cash rents paid by tenants who work farmland did not rise at the same rate during the same 12-month period, however, increasing by an average of just below 2 percent, from $110 to $112 for an acre of average agricultural land. The survey also found that an acre of Indiana farmland sold for nonagricultural use was worth an average of $6,149 in June, 6.7 percent more than the $5,764 it sold for a year earlier. "Regionally, among top-ranked, high-yielding farmland in the state, the greatest value increase was in the southwest, where the average value of an acre grew by 11 percent, from $2,384 to $2,646," said Craig Dobbins, Purdue agricultural economics professor who conducted the survey. "In farmland rated average or poor, the greatest increases in value came in the southeastern part of the state where the value of an acre of average land went up by 11.7 percent to $1,781 and the value of poor land rose by 12.8 percent, to $1,461." When asked to forecast land values through December 1998, respondents in almost all regions of the state predicted steady farmland values or marginal declines. "Last year, 54 percent of the survey respondents expected some or all classes of land to increase over the next 12 months, but that figure dropped to 28 percent this year," Dobbins said. "Last year, 6 percent of the respondents expected a decline in values. This year, that percentage increased to 26." The greatest optimism is in Indiana's southeast section, where respondents expect farmland of all classes to continue to increase in value by 2.8 percent up to 3.6 percent through December 1998. In northeastern Indiana, however, all three farmland categories are expected to decline in value by between 1.7 percent and 2 percent. Purdue agricultural economist Gerald Harrison, who assisted Dobbins with the survey report, pointed out that farmland values may get a boost from new tax-saving provisions in the federal estate tax law. "Special valuation of farmland allows the reduction of taxable landowner estates by up to $750,000, while the new family-owned business interest deduction excludes business interest in amounts up to $675,000," Harrison said. "These two provisions and others in income and estate tax law encourage family-operated land and other business assets to remain in estates and in existing families. While difficult to measure, these provisions would decrease the supply of land on the market." The complete Land Values Survey is available on the web. Click on "September 98." Sources: Craig Dobbins, (765) 494-9041; e-mail: dobbins@agecon.purdue.edu Gerald Harrison, (765) 494-4216; e-mail: gerald.a.harrison.1@purdue.edu Writer: Amy H. Raley, (765) 494-6682; e-mail: ahr@aes.purdue.edu Purdue News Service: (765) 494-2096; e-mail, purduenews@purdue.edu To the Purdue News and Photos Page