In the upcoming August issue of this publication I plan to release the results of our 2019 Indiana Farmland and Cash Rent Survey. Here I am providing summaries from the Chicago Fed and a February 2019 survey of Indiana Farm Managers and Rural Appraisers.

In the January 2019 issue of the AgLetter, the Federal Reserve Bank of Chicago reported District farmland values remained the same from January 1, 2018 to January 1, 2019. The most recent May 2019 issue reported only a 1% increase from April 1, 2018 to April 1, 2019. For the last quarter of 2018, Indiana farmland values increased 3%. For the first quarter of 2019, an increase of 2% was re- ported. These two increases were the largest quarterly increases in a District containing Iowa, Illinois, and parts of Indiana, Michigan, and Wisconsin. These data seem to indicate continued strength in Indiana farmland values.

To ascertain if Indiana’s professional farm managers and rural appraisers held a similar view of Indiana’s farmland market, members of the Indiana Chapter of Farm Managers & Rural Appraisers were surveyed during their winter meeting on February 6, 2019. Members were asked questions about the current and expected future market values for the following farmland:

“80 acres or more, all tillable, no buildings, capable of averaging 195 bushels of corn per year and 60 bushels of soybeans in a corn/bean rotation under typical management and not having special non-farm uses.”

Where are Farmland Values Headed?

Responses from people representing 19 different counties were received. The average estimated price of farmland was $8,225 per acre. Fifty-three percent of the respondents indicated no change in farmland values when compared to values in February 2018. Sixteen percent of the respondents indicated the estimated price was higher by an average of 7% compared to the value in February 2018. Thirty-two percent indicated the estimated price was lower by an average of 4% compared to the value in February 2018. The overall average percentage change in farm- land values for the year were 0.7%. This “no change” result for the year is consistent with the Chicago Federal Reserve surveys for the last quarter of 2018 and the first quarter of 2019.

The group was asked to provide two forecasts of future farmland values. One was farmland values in one year. The second was farmland values in five years. When asked about land values in one year, 42% of the respondents indicated that values would be the same. Twenty-one percent indicated farmland values would be up an average of 3%. The remaining 37% indicated a decline in farmland values averaging 3.7%. Across all responses, the expected change in farm- land values for the coming year was -0.7%. In the short run, these respondents had a strong consensus that farmland values will not increase.

However, there was optimism for an increase in farmland values over the next five years. In this case, 83% of the respondents indicated farmland values would be higher by an average of 10%. Six per- cent of the respondents expect farmland values to the same in five years and 11% expect farmland values to decline by an average of 7.5%. Across all responses, farmland values are expected to increase by 7.3%. A 7.3% to 10% increase over five years is modest by historical standards.

Cash Rents Not Much Change

Attendees were also asked to specify the cash rent for 2019. The average cash rent for the example parcel was estimated to be $238 per acre. The estimated cash rents varied from $115 to $300 per acre, a difference of $185 per acre. Eighty-four percent of the respondents indicated cash rent remained the same as in 2018. Five percent of the respondents indicated cash rents had risen and 11% indicated cash rents declined between 2018 and 2019.

As with farmland values, the respondents were asked to forecast cash rents one-year and five-years into the future. When asked what cash rent would be in 2019, 72% of the respondents indicated they would be the same as 2018. Eleven percent expect cash rents to increase and 20% expected them to decline. The overall average change in cash rents was 0.7%, almost no change.

There was a little less agreement about the five-year projection. A majority of 63% of the respondents indicated cash rents would exceed the 2019 level by an average of 8.5%. Thirteen percent thought cash rents would be the same and 24% thought cash rents would be lower by an average of 5.5%. While there is a strong expectation cash rents will change, the amount of change, both up and down, is small. Historically it is common for changes of the magnitude expected here over five years to be associated with a period of one or two years.

Final Thoughts

These results indicate Indiana’s farmland market has been in a period of relative stability. While markets are seldom perfectly stable, these February expectations are for relatively small future changes at least by historical standards. But there are lots of uncertainties that could change these expectations. Tariffs and trade uncertainty remain highly uncertain. The U.S. agricultural economy is heavily dependent on exports. If the ultimate result is lower commodity prices for farmers, as many seem to expect, this means lower margins and increased downward pressure on farmland values and cash rents. The size of future grain price declines and the size of government payments provided to off- set price declines will be important influences in Indiana’s future farmland and cash rent market.

Look for our 2019 Indiana Farmland and Rents Survey results in this publication in early August.