WEST LAFAYETTE, Ind. (AP) -- The worst drought in nearly a quarter century didn't stop Indiana farmland values from continuing to grow in 2012, a Purdue University study shows.
High net farm income, low interest rates and high farmland demand with supply combined to increase land values upward by 14.7 percent to 19.1 percent, depending on productivity, according to the study released Tuesday. Farmland rental rates rose by about 10 percent.
"While the 2012 Indiana crop suffered from the worst drought since 1988, the increase in farmland values did not bother to slow down," Craig Dobbins, a Purdue Extension agricultural economist, said in a news release.
The drought sent corn and soybean prices soaring to all-time highs, the study said. Combined with crop insurance indemnities, that meant better-than-expected farm incomes.
High-productivity land values jumped by 19.1 percent to $9,177 per acre, the study said. Average-productivity land increased 17.1 percent to $7,446 per acre, and poor-productivity land was up by 14.7 percent to $5,750 per acre.
Cash rents for high-productivity land increased by 10.9 percent or $29 per acre. Rent for average-quality land was up by 10.1 percent, or $21 per acre, and rent for poor-quality land was up 9.4 percent, or $15 per acre.
Land values, cash rents and farmland productivity were estimated for the study by surveying Indiana rural appraisers, agricultural loan officers, Farm Service Agency personnel, farm managers and farmers, Purdue said.
The 261 respondents also were asked to estimate long-term corn yields for poor, average and top-quality land, Purdue said. The state's average long-term corn yields for poor, average and top-quality land were 127,160 and 193 bushels per acre, respectively.
The consensus among respondents on future farmland values and cash rents is that increases will slow and, in some regions, values might stall or decline slightly, Dobbins said.
Forty-three percent of respondents said they thought farmland values would increase by an average 11.7 percent over the next five years, or an average annual increase of 2.2 percent. Thirty-five percent of respondents thought farmland values would decline by an average of 12.3 percent, or an annual decline of 2.3 percent. The remaining 22 percent expected no change.