Andrew Smith
A quiet announcement was followed with the scare headlines from television station websites — “Indiana has lost 345,700 acres of farmland, mostly to development.”
Of course, the sensationalized headlines hide the real story, but do a lot to whip up social media complainers.
Because the most important words are in the second half of that sentence — “but agricultural productivity still increased.”
That’s the beauty of markets. They encourage us to increase technological efficiency — in agriculture, that could be better seed or fertilizer, better planting and harvesting equipment — and thus allow us to produce more while using fewer resources. In this case, it’s more food on less land.
Big numbers can be scary, which is why viewing an economy as an aggregate is always dangerous. An economy is not a monolithic, aggregated being, but the sum total of millions of individual interactions made by buyers and sellers, each acting in their own interest and making themselves better off. In doing so, as Adam Smith explained, they make society better off as well even though that was never part of their intention.
And so, let’s disaggregate the numbers. 345,700 acres is 515 square miles. A typical county is 360 square miles, so essentially, about one and one-half counties of farmland was repurposed over a 12-year period from 2010–2022. In total, 515 square miles is 1.4% of the state’s land area and was 1.89% of the agricultural land area in 2010. In that time, Indiana’s population grew from 6.491 million to 6.833 million, an increase of 5.27%.
Yet, crop production increased despite the small drop in the land area used. Per USDA data, corn for grain nearly doubled, while soybean production grew 49% from 2012–22.
Per the Department of Agriculture study, 371,266 acres became residential development, mostly . However, a sizable amount of residential lands (328,501 acres) were repurposed for agriculture, almost a wash. A significant amount, especially in Southern Indiana, became forest wetlands.
Large quantities of repurposed land became residential developments in a ring surrounding Indianapolis, as well as in the Lake County, Fort Wayne, Michiana, Bloomington, Lafayette, Louisville and Evansville regions, essentially noting that suburbanization is leading to the transference of agricultural to residential land.
While that may be a perceived problem by urbanists and NIMBYs who want to put a lid on suburban growth and development, it is not a significant problem at all. The market tells us goods go to their highest-value uses, and in this case, there is a high demand for land on the edges of cities. Why would people prefer to live on the edge of a city rather than downtown? Because they can have a better quality of life with a larger home and more land at a cheaper price than an already-developed area. The Indianapolis metro area population alone grew 27.3% from 2010–24 and continues to see annual growth rates between 1–2%. Those new residents have to have places to live, and a sizable number of them will prefer single-family homes in the suburbs to smaller urban apartments and condos. With that, jobs and entertainment options are increasingly being found on the outskirts of the city.
In areas of high demand near cities, residential land (and commercial land to support the new residents) is the highest-value use, because a landowner can make more money selling it to homeowners or commercial businesses than continuing to farm it. While we may lament a “loss of the good old days” in suburban areas, it’s a natural progress. A growing population needs places to live — and beyond that, to work and worship, shop and play. So, the land is more valuable as a neighborhood than a farm. That’s not a bad thing. Where I live, just east of Indianapolis, new neighborhoods are popping up all over our community. I understand that’s a natural evolution and, rather than fret and fight and try to slam the door on the people behind me, I welcome it. Those new residents will bring with them more restaurants, more retail and a better quality of life.
The other part of the trend that isn’t getting reported is the conversion of more than 300,000 acres of land from developed to agricultural uses, which means the highest-value use in other parts of the state is no longer residential. We have long seen a trend of people moving from rural areas to cities, meaning there is less demand for housing and business use in those rural communities, thus meaning farming is a higher-value use than other uses.
It’s the natural ebb and flow of the market — as people move to urban and suburban areas, they will demand housing and will pay more for it than a farmer could make otherwise. As people move out of rural communities, land that was previously used for residential and commercial uses is now more valuable as farmland.
What is important is we do not need more central planning or more government rules and zoning boards determining what can and can’t be done with specific parcels of land — and in turn, limiting the value of some landowners’ property while enhancing the value of others’, which increases the ability for cronyism and back-room deals. We need to allow the market to work.
Because we are able to produce more food on less land, we are able to repurpose suburban farmland to higher-value residential and commercial uses. But at the same time, we’re seeing land being converted back to higher-value agricultural uses outside of the growing suburban areas. Everything will balance.
Andrew Smith is an economics instructor at New Palestine (IN) High School and an adjunct instructor for Vincennes University.
