A recent Purdue University survey of farm managers and appraisers indicates farmland prices have increased about 13 percent since February 2012. Still, signs indicating a slowdown are becoming evident.
Prices have been rapidly rising for the past two years, and the last year’s drought did little to slow that down.
Halderman Farm Management President Howard Halderman says the average price of farmland his company has sold this year has increased by 10 percent 18 percent. He says profits drive land prices and even though farm incomes were down this past year, they were still good.
“One needs to be mindful that while incomes are down for 2011, it’s still the second highest net income year every,” he says. “So being mindful of that, the second highest net income ever is still a very positive outcome.”
Purdue University agricultural economist Craig Dobbins says the factors leading to price increase are still in place—at least for the time being.
“Short term, we can expect to see farmland values to continue to move up,” he says. “Longer-term, I think the situation gets a little bit more cloudy. We’re seeing evidence that these high prices are stimulating farmers around the world to try to produce more.”
That would increase supply, dropping crop prices and, in turn, farmland values. Dobbins says there are also indications that demand for corn used in ethanol production is slowing—which could cause prices to decline further.