Todd Kuethe of Purdue University meets with Acres’ Aaron Shew to discuss the future of farmland valuation through collaborative data and research.
In this expert interview, Acres’ Aaron Shew speaks with Todd Kuethe, a Purdue University professor and Schrader Chair holder in Farmland Economics, about the role of market research and data in understanding land values.
They discuss the importance of the Center for Commercial Agriculture, the significance of land value surveys, and the impact of transaction-based analysis. They also touch on the volatility of land values, the influence of demographics, and the necessity of data literacy in agriculture.
5 Key Takeaways
1. Acres x Purdue University Partnership
02:01 - Aaron: There's a lot of great research and extension work obviously coming out of the Purdue Center for Commercial Ag, which is where this partnership really sits and I think contributes a lot of value. [...] I remember kicking around this idea that, you know, there's probably some really cool land values reporting we could do based on transactions that would serve a good extension purpose, maybe some research.
[...] And now here we are, we've got a partnership in hand. Gonna publish some transaction-based land values reports to pair really nicely with the cash rent and land value surveys that Purdue has been doing for a long time.
Takeaway: Acres and Purdue University have partnered to enhance land valuation accuracy by integrating data-driven insights, land surveys, and transaction-based analysis. As part of this collaboration, these advanced tools and resources will be made available to Purdue students, equipping them with comprehensive training and industry-relevant expertise more efficiently.
2. Integrating Transaction and Survey-Based Research
14:55 - Aaron: Even with a transaction-based report, and that's back to the point of having some survey results as well, sometimes, there's only perceived value.
You know, if you've only got three transactions in a county and one's really high because maybe, you know, a landowner next door really, really wanted it. So they were willing to pay the high price to get a farm right next door. Another really low transaction occurred between family members. And then there was one that maybe would have hit what we would consider the average.
Takeaway: While transaction-based data alone may not always provide a complete picture of land values, integrating it with survey-based research helps balance statistical accuracy with market perceptions.
By combining these approaches, transaction-based analysis can validate survey findings, offering a more comprehensive and reliable assessment of land values.
3. Development Pressure
17:35 - Aaron: The big things you get, the weird idiosyncrasies you see are generally because of development, right? You've got one county in the area that's got a lot of development happening and so there's development pressure which increases values and so dealing with those kinds of factors is a challenge.
Takeaway: Development pressure has become a key driver of land prices in recent years, creating volatility in certain regions and making valuation more complex. As urban expansion and infrastructure projects extend into rural areas, demand for land may increase, often leading to unpredictable valuation fluctuations.
4. Interest Rates
19:42 - Todd: In the last couple of years since interest rates have started to go back up, that's switched to a negative force and it's much stronger.
Takeaway: Interest rates have shifted from being a positive to a negative force on land values. Higher interest rates make borrowing more expensive, reducing the affordability of land purchases and slowing down demand.
5. Demographic Influence
21:09 - Todd: There's a lot of middle-aged millennials, right? That are sort of at the core of their work experience and then able to make investments. [...] We're within 15 years or so of some millennials starting to retire.
[...] It's this kind of millennial generation, which is another large population boom, moving into the suburbs or sort of commuting distance. And so it's really shifting a lot, I think, in terms of where prices are interesting and active beyond just the agricultural sector.
Takeaway: Demographic shifts, including moving around the country and moving further from development hubs due to remote work opportunities, particularly among millennials, are influencing land market dynamics.
Final Thoughts
The partnership between Acres and Purdue University marks a significant advancement in farmland valuation. As the landscape of land valuation continues to evolve, staying ahead of market trends demands innovative tools and data-driven research.
By integrating transaction-based analysis with survey-driven insights, this collaboration provides a more comprehensive understanding of land values, equipping industry professionals with the knowledge needed to make well-informed decisions.
