Purdue Says Farmland Values Dropped Again

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(Image courtesy of Purdue University) (Image courtesy of Purdue University)
WEST LAFAYETTE -

The 2016 Purdue Farmland Value Survey shows the average price of farmland has declined over the last year. Analysts say they have not seen dips of this size since the mid-1980s.

Values were down between 8.2 and 8.7 percent on average in a year and around 13 percent in two years. Declines of more than 10 percent, like those seen throughout the northern portion of the state, are rare. Year-over-year, top-quality farmland was down from an average of $9,266 per acre to $8,508. Average-quality dipped to $7,041 from $7,672 and poor-quality land went from $5,353 to $5,863 an acre.

Report authors Craig Dobbins and Kim Cook, who are agricultural economists, said in a statement "the collapse in grain prices and the impact of tighter gross margins are working their way through the agricultural economy. While the underlying reasons for multiple years of tight gross margins now are not the same as in the 1980s, a series of years with downward adjustments in farmland values and cash rents like the 1980s may still be the result."

The price farmers pay to rent land has also declined for a second year in a row and those participating in the survey expect these so-called cash-rents to decline further next year.

Respondents believe low grain prices, low and stable long-term interest rates and low inflation rates will continue, which could have adverse effects down the road if farmers are correct. "Lowering per-unit cost of production will take time and will likely be a combination of adjustments in lower input costs, higher yields, and lower cash rents and farmland values, each contributing a small change," said Dobbins and Cook.

Results of the annual survey are based on responses from sources including rural appraisers, commercial bank and Farm Credit Mid-America agricultural loan officers, Farm Service Agency personnel, farm managers and farmers.

You can connect to the full report by clicking here.

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