Farmland Prices: Is this Time Different?

Sergio Lence

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The historical behavior of farmland prices, rental rates, and rates of return are examined by treating farmland as an asset with an infinitely long life. It is found that high (low) farmland prices relative to rents have historically precededextended periods of low (high) net rates of return, rather than greater (smaller) growth in rents. Our analysis shows that this attribute is shared with stocks and housing, and the financial literature provides ample evidence that other assetsfeature it as well. The long-run relationship linking farmland prices, rents, and rates of return is analyzed. Based on this relationship, we conclude that recent trends are unlikely to be sustainable. The study explores the expected paths thatfarmland prices and rates of return might follow if they were to eventually conform to the average values observed in the historical sample, and concludes with a discussion of the policy implications. Recommendations for policy makers include close monitoring of farmland lending practices and institutions to allow early identification of potential problems, and identifying in advance appropriate interventions in case recent farmland market trends were to suddenly change.

Keywords: farmland; Rate of return; price; rents (search for similar items in EconPapers)
JEL-codes: Q14 (search for similar items in EconPapers)
Date: 2014-09-11
New Economics Papers: this item is included in nep-mfd
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Farmland Prices: Is This Time Different? (2014)
Working Paper: Farmland Prices: Is This Time Different? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:38979

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