Review of the PAER Land Values & Rents Report
What does the annual Purdue University Land Values & Cash Rents Survey Say?
In a nutshell, it indicates an adjustment in the price per acre and cash rents. Agricultural farmland prices typically work on the fundamentals of inputs and outputs for returns and certain areas of the state of Indiana, along with certain types of farmland are affected.
For those producers, landowners or investors that own farmland, the PAER annual report is a great tool to gauge the market. Over the years it has proven to be a very great barometer for where the state of real estate values are and how they affect the overall economics of Indiana agriculture.
The value of an acre of farmland in Indiana is never cut & dry. With so many factors affecting land values, it’s important to make a few distinctions about the types of farms / soils. PAER and most agribusiness professionals break down farmland into Top Quality, Average and Low Quality categories
There are 3 Categories of Farmland related to Productivity (number of bushels per acre that can be produced)
- Top Quality
- Low Quality
The PAER annual survey notes that price per acre averages are a mix of several different locations and soil types across specific regions and the state in general. Determining the actual value of an Indiana farm can only be determined by a land broker, real estate appraiser and the producer or land investor themselves.
How much are farms worth today?
Top Quality Farmland in West Central Indiana, including Benton County, Tippecanoe County, Warren County Carroll County, Montgomery County and others remains strong at a price per acre averaging $10,383 per acre.
Average Quality farmland in West Central Indiana came in at an average price per acre of $8,913 per acre.
Lower Quality farmland in West Central Indiana averaged $6,926 per acre.
Land that sits close the city, near developments or improvements is considered to be “land in transition.” Farmland in these areas typically becomes development such as residential home sites or commercial buildings or parks and follows the “highest and best use” model. This means that the “price per acre ranged from $2,800 up to $35,000 per acre,” according to the 2015 PAER report.
What type of return is there on Indiana farmland?
Average price of cash rent per acre on Top Quality Indiana Farmland in West Central Indiana was $334 per acre.
Average price of cash rent per acre on Average Quality Indiana Farmland in West Central Indiana was $281 per acre.
Average price of cash rent per acre on Low Quality Indiana Farmland in West Central Indiana was $224 per acre.
The Full Report
With commodity prices in continual flux (quite lower than they were a few years ago), input costs on the rise and the potential for interest rates to increase – the value of farmland real estate is ever changing. From the expectations of the buyer and seller to the financial and emotional considerations that occur in every real estate transaction,
the old adage remains true – the farmland real estate market is local in nature and should not ignore the fundamentals.
About the Author
Johnny Klemme is a published author, graduate of Purdue University and Land Broker specializing in farms, recreational property and development land in West Central Indiana. Born and raised on a local farm, his commentary on issues that are important to the farming and real estate community can be found at www.PrairieFarmland.com/blog