THE FARMLAND VALUATION REVISITED

Xin Li

International Journal of Food and Agricultural Economics (IJFAEC), 2016, vol. 04, issue 2, 14

Abstract: Empirical research is scarce concerning the dynamics of farmland markets which inspire the decision to sell farmlands. This paper explores the real option to postpone the sale of land in farmland valuation. In this article, a real options approach is used to analyze farmland prices behavior using historical cash flow and land price information for Illinois. In general, rising farmland values are primarily dependent on agricultural commodity prices and interest rates. Results suggest that uncertainty about future growth and capital gains is a significant component of farmland market value. Furthermore, this research examines several shift factors of the option value of the state’s farmland by taking into account of uncertainty to improve the analysis of farmland market values.

Keywords: Agricultural and Food Policy; Farm Management; Land Economics/Use; Political Economy; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ijfaec:234907

DOI: 10.22004/ag.econ.234907

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