Higher interest rates and low crop prices will likely drive down the value of Indiana farmland in 2016, but any losses should be moderate, a Purdue University agricultural economist says.
But since there is a limited supply of farmland on the market, Craig Dobbins expects values to fall slowly, continuing a trend that began last year after a decade-long rally.
He forecasts farmland values dropping 5-12 percent throughout the state next year after nearly tripling in value from 2003 to 2014.
According to the 2015 Purdue Land Value and Cash Rent Survey, prices for the state's top-quality farmland declined by 5.1 percent for the year, from an average of $9,765 per acre in 2014 to $9,266. Farmland considered to be of average quality fell by 3.8 percent, from $7,976 to $7,672 per acre, and prices for low-quality land fell 4.8 percent, from $6,160 to $5,863.
Analysts said last year's losses in farmland values were due primarily to low commodity prices after two straight bumper crops. This year the major concern could be higher interest rates, which make it more expensive for buyers to borrow money for major purchases such as real estate.
Dobbins also expects cash rents to continue to fall statewide in 2016 after declining in 2015 for the first time in almost 30 years. The primary reason rents have been going down, he said, has been the drop in farm incomes.
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