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Delphi, IN Land Sale Doesn't Support Land Price Drop Theory
Chris Hurt and Craig Dobbins, Purdue ag economists, have been reluctant to say what some think is inevitable - that the economic upheaval may make lower land prices.
"So far, that doesn't seem to be the case," Hurt notes. And factors that led to the land price crash in the early 80s, including a large amount of debt in farm circles, aren't factors at the current time.
The report from the Chicago Federal Reserve District for the quarter ending in October didn't support it either. The rate of growth was considerable smaller than a year ago, but there was still slight growth in prices during the quarter.
Compared to land values in October 07 vs. October 08, the report said land values were still considerably higher, often by double-digit amounts.
Perhaps the most compelling evidence that land values haven't toppled, at least not yet, come from recent land sales of good farmland in Indiana and adjoining states. Carl Carter, with Schrader Real Estate and Auction Company, says recent sales speak for themselves.
Thirty bidders spent more than an hour competing for 272 acres in Carroll County near Delphi on Dec. 2, Carter reports. When the bidding stopped, the land sold at $6,687 per acre, or $1.82 million.
"The property sold at a premium relative to farmland of similar quality in other areas, because it was in a location where there was strong demand from farmers and investors in the immediate area," says Rex Schrader, president of the auction company.
Carroll County is sometimes considered the race horse flats of Indiana, a reference to the flat, black soils near Decatur, Ill., where farmers usually plant early and harvest good yields most years. In this case, three bidders split the Carroll County property, with average price ranging from $5,680 to $7,639 per acre .
Previous auctions during the fall also leave both Carter and Schrader convinced that land values are still strong, and that investors continue to recognize the long-term value and stability of ag land.
Here's a recap of fall sales, coupled with economic conditions at the time:
Sept. 12 sale - The December 09 corn contract was still $5.30 per bushel, and the Dow-Jones Industrial Average was 11,421. Schrader Auction Company offered 1,222 acres of tillable land. It had a soil index of 121 for corn. By comparison, the Delphi land featured a soil index of 129. Average selling price that day was $4,732 per acre.
Dec. 09 corn was down to $3.87 by Oct. 16, and the Dow at 8,979. Those are 27% and 21% drops, respectively. Yet Schraders sold 187 acres of farm land at $5,130 per acre . The soil index for corn was 127 bushels per acre.
Another 1,092 acres went on the block on Nov. 25. Corn was down to $3.68 per bushel and the Dow stood at 8,479. Yet the land averaged $5,216 per acre . Its soil index for corn was 129 bushels per acre.
"Today's buyers are sophisticated," Schrader concludes. "They want to know details about land quality, soil type, drainage and other factors that reflect productivity. They analyze a tract of farm land the same way they would a stock for their portfolio.
"If you're short on specifics, you'll have fewer bidders and lower prices. Fortunately, our extensive experience in selling farmland is paying off for our sellers in this environment."