Low Grain Prices Hit Home As Indiana Farmland Value Drops

Aug 5, 2016

Credit Sylvia Bao / http://indianapublicmedia.org/news/

The value of Indiana farmland is seeing its biggest decline since the 1980s.

That's according to Purdue University's annual Farmland Value Survey, which says the drop is mainly due to low grain prices.

Indiana farmland values have been falling since 2014, but the estimated decline this year is especially steep -- around 8.5 percent statewide, putting the cost of an average acre of land at a little over $7000.

Purdue agricultural economist Craig Dobbins said it's another effect of low prices for grains, especially corn. It's cheap right now because countries have too much in storage, and not enough to do with it -- demand for products such as ethanol is low.

"Certainly, us economists like to think that the value of land is closely tied to the value of the products that are produced on that land," Dobbins said.

Those values -- whether a farmer rents or buys -- are down across the Midwest. With a lot of uncertainty around when grain prices might rebound, Dobbins said, it might not last. But in the meantime:

 

"The corn and beans we raise are now worth less, the cost that it takes to produce those crops has remained reasonably constant, so the margin between revenues and costs is smaller," Dobbins said.

That means farmers also have less to spend on land, no matter its price.