Many farmland investors in Indiana and surrounding Corn Belt states plan to continue buying despite some concerns that the market might not be able to sustain recent, rapid price increases, according to a Purdue University agricultural economics study.
"The rapid increases have led some people to speculate that the farmland market is in a bubble," says Brent Gloy, professor of agricultural economics and director of Purdue's Center for Commercial Agriculture, which conducted the survey designed to gauge attitudes, beliefs and expectations of buyers. "Without knowing what investors really think of the market environment, we cannot adequately respond to that speculation. This study helps us answer questions about what's driving farmland prices."
Nearly 250 farmers, farmland investors, agricultural lenders and agribusinesses responded to the survey, conducted in late February. Nearly half of the respondents said their operation was primarily in Indiana, with most of the remaining respondents owning farmland in surrounding Corn Belt states. Their median farmland ownership was 500 acres.
Fifty-four percent of the respondents said they believed that the farmland market is in a bubble, although farmers with larger operations and more experience were less likely to be concerned about that than those with fewer acres and less experience. Still, 74 percent said they planned to buy additional land in the next five years.
Sixty-five percent of the respondents felt that someone else would pay more for the farmland than what the respondents themselves felt it was worth. Nearly all of the respondents believed that the amount of farmland for sale was less than normal or about the same as usual.
Gloy said the findings indicate that the market is "still searching for equilibrium prices" after the dramatic crop price increases over the last decade. The limited amount of farmland for sale further complicates the situation.
Gloy will present more detailed study results July 11 at the 45th annual Top Farmer Crop Workshop in West Lafayette.
To learn more about the survey and data or to download the full report, visit: http://bit.ly/KDIK9I