Big Farmland Purchases Expected to Continue

By CnAgri2012-06-28 19:55:55 Print

Many farmland investors in Indiana and surrounding Corn Belt states plan to continue buying despite some concerns that the market might not be able to sustain recent, rapid price increases, according to a Purdue University agricultural economics study.

Farmland values have risen considerably in the past decade nationwide, especially throughout the Corn Belt, including Indiana. The most productive farmland in Indiana doubled from 2004 to 2011, increasing from an average of $3,278 per acre to $6,521. From 2010 to 2011 alone, Indiana farmland values jumped by 22.8 percent.

"The rapid increases have led some people to speculate that the farmland market is in a bubble," says Brent Gloy, professor of agricultural economics and director of Purdue's Center for Commercial Agriculture, which conducted the survey designed to gauge attitudes, beliefs and expectations of buyers. "Without knowing what investors really think of the market environment, we cannot adequately respond to that speculation. This study helps us answer questions about what's driving farmland prices."

Nearly 250 farmers, farmland investors, agricultural lenders and agribusinesses responded to the survey, conducted in late February. Nearly half of the respondents said their operation was primarily in Indiana, with most of the remaining respondents owning farmland in surrounding Corn Belt states. Their median farmland ownership was 500 acres.

Fifty-four percent of the respondents said they believed that the farmland market is in a bubble, although farmers with larger operations and more experience were less likely to be concerned about that than those with fewer acres and less experience. Still, 74 percent said they planned to buy additional land in the next five years.

Asked to consider an 80-acre tract of farmland with a normal production capacity of 165 bushels of corn per acre, what respondents estimated they would pay for it varied widely, with the average at $6,179 per acre.