News Update
August 18, 2010

Indiana Farmland Values Saw Substantial Increase From 2009

Farmland values have risen higher than expected throughout the state during the past year, according to a new Purdue University report.

The 2010 “Indiana Farmland Value and Cash Rent Survey” showed that land values increased between 4.5% and 6.3% statewide. Top-quality farmland values averaged $5,310 per acre, while average-quality farmland was valued at $4,419 per acre and poor-quality land averaged $3,501 per acre.

“What we found in the report this year is that land values increased sharply when compared with what had occurred the prior year,” said Craig Dobbins, Purdue Extension agricultural economist. “In 2009 we had a bit of a downward correction in our survey numbers.”

One factor affecting land values is soil productivity, which is measured using long-term corn yield estimates. Dividing the farmland value by the expected long-term corn yield resulted in a value of $28.41 per bushel (bu.) for top-quality land, with average-quality land at $28.56 per bu. and poor-quality land at $28.93 per bu. — a surprisingly narrow range, Dobbins said.

Dobbins also said there was a grain price recovery earlier this year and farmers planted crops earlier, which led to renewed optimism about crop margins. There also were reduced input costs, mainly in fertilizer, contributing to better crop margins.

“Those two things together have provided some increased optimism in the land market,” Dobbins said. “Land also continues to be a good investment on the part of people looking to invest money. The stock market is still jumping all over and no one knows what direction it is likely to go. The land market has been more stable. And with this renewed optimism I think people have come back into the market.”

To explore differences in farmland values across the state, survey responses were divided into five regions: North, Northeast, West Central, Central, Southwest and Southeast. The strongest increases were in the West Central and Northeast regions, ranging from 3.6% to 8%. In the North, the survey indicated that changes for top-, average- and poor-quality land were less than 1%. In the Southeast, top-quality land value increased, but poor-quality land value decreased.

Higher values are good news for farmers who own land because it provides increased equity. A business that demonstrates steady increases in business equity likely will have an easier time renewing loans at the bank. But for those looking to buy land, the value increases may mean more difficulty in doing so. Continued declines in long-term interest rates might make investing in land a little bit easier, Dobbins said.

For the remainder of 2010, survey respondents indicated they did not expect much change in land values, and over the next five years most of the increases were expected to be modest.

“We’ve had some strong increases in farmland values over the past few years, and we asked respondents to project what might be happening in the future,” Dobbins said. “What we discovered is that respondents are not expecting much change in land values the last half of this year. When we looked at what might happen five years down the road, we found that most people thought the values were going to be higher, but the rate of increase is not likely to be what it has been.”

The survey also looked at cash rents, which increased 2% to 2.5% statewide.

For the first time, cash rent for top-quality land was above $200 per acre at $202, Dobbins said. Cash rent for average-quality land was $161 per acre and $124 per acre for poor-quality land. This was $3 to $4 more per acre than in 2009.

As with farmland values, productivity is important in determining cash rent. When the state cash rent is divided by the expected long-term corn yield, rent per bu. across land quality groups varies only from $1.02 to $1.08. The highest cash rents continue to be in the West Central and Central regions of the state. Average cash rent for top-quality land in these two regions was $206 to $225 per acre. Average-quality land was $184 and $169, while poor-quality land was $147 and $135.

The lowest cash rents are in the Southeast region.

Purdue’s “Indiana Farmland Value and Cash Rent Survey” is completed annually by the Department of Agricultural Economics. Individuals surveyed include rural appraisers, agricultural loan officers, Farm Service Agency (FSA) personnel, farm managers and farmers. The results provide information about the general level and trend in farmland values.

The full report is available online at www.agecon.purdue.edu/extension/pubs/paer/2010/august/dobbins.asp.

— Release by Purdue Extension.

Growth In U.S. Beef Imports Anticipated In The Second Half Of 2010

Imports of beef to the United States for 2010 are forecast at 2.6 billion pounds (lb.), fractionally below 2009 levels. Data from the second quarter showed imports to be at 690 million lb. — 8% below the year-earlier second-quarter total. Coupled with lower supplies in Australia, the strong Australian dollar is a factor that has continued to plague the U.S. import market for Australian beef products, which, in turn, has put downward pressure on total U.S. beef imports thus far in the year. Imports of Australian beef through June were 40% below year-earlier levels. Australia is also a primary competitor of the United States in the beef export market, particularly for markets in Asia (South Korea, Japan, and Taiwan), and the strong Australian dollar is an additional factor keeping U.S. export products competitive in world trade. Beef imports from New Zealand were also down 6%, and in lieu of these decreases from Oceania through June, more product is coming across the Canadian border. Imports from Canada were 14% higher, year-over-year.

The third and fourth quarters should demonstrate beef import growth above year-earlier levels at 700 million and 640 million lb. imported, respectively; this would equal quarterly increases of 13% and 16%, year-over-year. The increase in U.S. imports should also be synonymous with gradually increasing beef supplies in Australia toward the end of 2010, a result of herd rebuilding that began earlier this year. U.S. beef imports for 2011 are forecast to increase 7% from the 2010 total. Tighter domestic supplies and greater availability of beef in the world market should rally imports next year.

— Release from USDA/ERS Livestock Dairy & Poultry Outlook

Forage Day Offers Demonstrations and Hay Competition

Purdue’s annual Forage Day will take place Sept. 2 at the university’s Agronomy Center for Research and Education near West Lafayette.

The day will begin with registration at 8:30 a.m. and end at 4 p.m. after an in-field forage harvest demonstration.

Sponsored by Purdue Extension and the Indiana Forage Council, Forage Day combines educational presentations with equipment demonstrations.

“The goal is to inform farmers on how to produce and utilize forages,” said Purdue Extension forage specialist, Keith Johnson. “It also gives farmers the opportunity to interact with producers of like interest, agribusiness personnel and university personnel.”

The field day is the only annual event in the state with live demonstrations of harvesting equipment, Johnson said. “Seeing the different pieces of equipment perform side by side is helpful, especially for those in need of new equipment.”

Forage Day also offers a hay quality contest. To participate, farmers should bring an unbroken bale of hay. A certificate from the Indiana Forage Council, along with forage-related products from agribusinesses, will be awarded to the winners of grass, legume and mixed divisions. Each bale will be tested, and the results will be announced within two weeks following the field day.

The field day is free, but an optional lunch will be about $5. There also is a $10 fee for those seeking pesticide applicator recertification credits.

The agronomy center is located at 4540 U.S. 52 West, about six miles west of Purdue’s main campus. For more information visit, www.agry.purdue.edu/forageday/.

— Release by Purdue Extension.

— Compiled by Mathew Elliott, assistant editor, Angus Productions Inc.