INDIANA FARMLAND VALUES AND CASH RENTS: 2021 SURVEY RESULTSFRIDAY, AUGUST 20, 2021

Todd Kuethe, Associate Professor, Schrader Chair in Farmland Economics

Michael Langemeier, Professor & Associate Director, Center for Commercial Agriculture

James Mintert, Professor & Director, Center for Commercial Agriculture

L a n d V a l u e s

Purdue Farmland Value Survey§ Survey conducted annually in June since 1974

§ Respondents: rural appraisers, ag lenders, farm managers, and farmers

§ Information collected:

• Land values December 2020, June 2021, December 2021 (projection)

• Top, average, and poor quality land

• Annual cash rental rate

• Long-term corn yield (productivity)

Indiana Farmland Values

2021 vs. 2020 Survey Results, State Averages by Land Quality

Land Quality

Yield (Bu/Ac)

2020 Value ($/A)

2021 Value ($/A)

Percent Change

Top 212 $8,579 $9,785 14.1%

Average 182 $7,236 $8,144 12.5%

Poor 153 $5,746 $6,441 12.1%

Indiana Farmland Values

Top, Average, and Poor Quality Land, 2000 − 20219,765 9,785

7,976 8,144

6,1606,441

0

2,000

4,000

6,000

8,000

10,000

2000 2003 2006 2009 2012 2015 2018 2021

TopAveragePoor

2014 Peak

Indiana Farmland Values

Average Quality Land, 1980 − 2021

6,288

9,111

2,100

7,976

8,144

0

2,500

5,000

7,500

10,000

1980 1985 1990 1995 2000 2005 2010 2015 2020

RealNominal

Land Value Drivers

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

1.NetIncome

2. GrowthRet.

3. CropPrice

4. LvstkPrice

5. Interest 6. Alt.Invest.

7. Export 8. Inflation 9. Liquidity 10. AgPolicy

Ave

rage

Influ

ence

Val

ue

2019 2020 2021

Most Recent Land Values Peak Occurred After Corn Prices Peaked

$2.00

$6.89

$4.46

$3.70

$3.56

$4.40

$5.75

$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00$5.50$6.00$6.50$7.00

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

$/bushel

Harvest Year

U.S. National Average Cash Corn PricesBy Marketing Year

Source: USDA-WASDE, USDA Forecast for 2021 Purdue Center for Commercial Agriculture

Soybean Price Strength Helped Prolong Previous Farmland Value Boom

$5.66

$14.40

$10.10

$8.57

$10.90

$13.70

$4

$6

$8

$10

$12

$14

$16

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

$/Bu.

Year

U.S. National Average Cash Soybean PricesBy Marketing Year

Source: USDA-WASDE, USDA Forecast for 2021 Purdue Center for Commercial Agriculture

Operating and Real Estate Interest Rates Since mid-1970’s

0

2

4

6

8

10

12

14

16

18

20

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Agricultural Interest RatesReal Estate Operating

Source: Federal Reserve Bank of Chicago

Ten-Year Moving Average of Agricultural Interest Rates Continues to Decline

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Agricultural Interest Rates on Farm Real Estate Loans10-Year Moving Average

Source: Federal Reserve Banks of Chicago and St. Louis

Projected Real Interest Rate in 2021 is Negative

-2

0

2

4

6

8

10

12

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

2017

2021

Real Agricultural Interest Rates on Farm Real Estate LoansSource: Federal Reserve Banks of Chicago and St. Louis

Changes in Farm Liquidity can be Examined with Loan Demand and Repayment Indices

0

20

40

60

80

100

120

140

160

180

70.1

72.1

74.1

76.1

78.1

80.1

82.1

84.1

86.1

88.1

90.1

92.1

94.1

96.1

98.1

00.1

02.1

04.1

06.1

08.1

10.1

12.1

14.1

16.1

18.1

20.1

Farm LiquidityFarm Credit Conditions, Federal Reserve Bank of Chicago

Loan Demand Loan Repayment Neutral

Regional Indiana Farmland Values

Price per acre- Top- Average - Poor

Percent change from 2020- Top- Average - Poor

Projected Land Value Change

Land Quality12/2020 − 6/2021

(Actual)6/2021 − 12/2021

(Projected)

Top 8.0% 3.9%

Average 7.6% 3.9%

Poor 7.8% 4.2%

Comparison with USDA Land ValuesAverage quality land (Purdue Survey), USDA cropland, USDA farm real estate, 2000 − 2021

0

3,000

6,000

9,000

2000 2003 2006 2009 2012 2015 2018 2021

USDA (Cropland)

USDA (Real Estate)

Survey

I-State Cropland Values

USDA per acre cropland values, 2000 − 2021

7,900

7,810

6,800

0

3,000

6,000

9,000

2000 2003 2006 2009 2012 2015 2018 2021

Illinois

Iowa

Indiana

Land Value Summary

§ New record high in 2021 (nominal)

§ Land values expected to continue to increase in second half of 2021

§ Key drivers: farm income (+), commodity prices (+), interest rates (+)

C a s h R e n t s

Indiana Cash Rents

2021 Survey Results, State Averages by Land Quality

Land Quality

Yield (Bu/Ac)

2020 Value ($/A)

2021 Value ($/A)

Percent Change

Top 212 $259 $269 3.9%

Average 182 $217 $227 4.6%

Poor 153 $175 $183 4.6%

Indiana Cash Rents

Average Quality Land, 2000 − 2021

232

265

227

0

50

100

150

200

250

300

2000 2003 2006 2009 2012 2015 2018 2021

Nominal

Real

Regional Cash Rental Rates

Percent change from 2020- Top- Average - Poor

Cash rent per acre- Top- Average - Poor

Cash rent to land value ratio

Average Quality Land, 2000 − 2021

8.1%

2.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

1980 1985 1990 1995 2000 2005 2010 2015 2020

Mean = 5.0%

Price to Rent Ratio is Historically High

10

15

20

25

30

35

40

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Farmland Price to Cash Rent Multiple for West Central Indiana, 1960 to 2021.Actual P/rent Average P/rent

I-State Cash Rents

USDA per acre cash rent, 2000 − 2021

233

227200

0

50

100

150

200

250

300

2000 2003 2006 2009 2012 2015 2018 2021

IowaIllinoisIndiana

Strong Upward Pressure on Cash Rents

$328

$402

$306

252 262 275

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21P 22P

Cash Rent and Net Return to Land, West Central IndianaNet Return to Land Cash Rents

Cash Rent Summary

§ Increased 3.9% to 4.6%

§ Cash rent to land value ratio decreased to 2.8%

F a r m l a n d v s . A l t e r n a t i v e I n v e s t m e n t s

Indiana Farmland vs. Alternative Investments

Average annual return, standard deviation (risk), and coefficient of variation1980 - 2020 1990 - 2020 2000 - 2020 2010 - 2020

MeanStd. Dev. C.V. Mean

Std. Dev. C.V. Mean

Std. Dev. C.V. Mean

Std. Dev. C.V.

S&P500 9.8 15.8 1.6 8.6 13.9 1.6 5.0 14.0 2.8 12.0 8.0 0.7Treasury (10) 6.0 3.4 0.6 4.5 2.0 0.5 3.4 1.4 0.4 2.2 0.7 0.3Gold 7.2 26.6 3.7 6.2 15.3 2.5 10.7 16.0 1.5 7.3 16.2 2.2Average qualityfarmland 8.8 9.2 1.0 10.9 7.1 0.7 10.1 7.8 0.8 8.6 9.5 1.1

Correlations Among Investments

Farmland has low or negative correlation with other investmentsFarmland

Top Average Poor AAA CPI DJIA Gold Housing S&P500Treasury

(10)Total return to Indiana farmland, by quality class

Top 1.00Average 0.99 1.00Poor 0.97 0.99 1.00

Alternative investmentsAAA −0.37 −0.38 −0.39 1.00CPI 0.00 −0.01 −0.04 0.63 1.00DJIA −0.05 −0.02 0.02 0.05 −0.06 1.00Gold 0.00 0.00 0.04 −0.11 0.40 −0.04 1.00Housing −0.26 −0.24 −0.19 0.12 0.18 0.18 0.03 1.00S&P500 −0.01 0.01 0.05 0.04 0.01 0.94 0.01 0.21 1.00Treasury (10) −0.35 −0.35 −0.36 0.99 0.65 0.06 −0.11 0.15 0.06 1.00

F a r m l a n d T r a n s a c t i o n s a n d T u r n o v e r

Indiana Farmland Transactions, 2016-2020

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

0

100

200

300

400

500

600

700

2016 2017 2018 2019 2020

Acr

es T

rans

acte

d

Num

ber o

f Tra

nsac

tions

Transactions Acres

Indiana Farmland Turnover by Region, 2016-2020

1.9 1.9 1.9 2.02.3

3.9

2.22.2 2.1 2.22.5 2.6

3.6

2.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

North Northeast West Central Central Soutwest Southeast Indiana

2016 2017 2018 2019 2020

Indiana Transaction Prices and Survey Values, 2016-2020

5,000

6,000

7,000

8,000

9,000

2016 2017 2018 2019 2020

Mean transaction Top Average Poor

THANK YOUFull report available on Purdue Center for Commercial Agriculture’s website

https://purdue.edu/commercialag

“Farmland Value & Cash Rental Rates: 2021 Survey”