Farm Foundation Forums

Current Projects

Archived Projects


Government Policy and Farmland Markets: Implications of the New Economy



Farm Foundation supported a May 6, 2002, conference to examine the economic determinants of land value and consequences of changes in land values following from the aforementioned issues. Click  here for a preliminary conference program. A conference summary is available  here.

Farmland has occupied a dominant position in agricultural policy since the beginning of the nation. The Homestead Act of 1862 provided a mechanism for allocating unoccupied land to farmers. The establishment of the Federal Land Bank in 1916 provided longer-term credit for the purchase of land. Programs such as the Farmer's Home Administration provided credit so that sharecroppers and beginning farmers could purchase farmland. These programs recognized the fact that farmland is a basic factor of production in the agricultural enterprise. Even confinement livestock operations require some amount of land. Partially as a result of this intimate relationship, farmland has become a dominant part of the agricultural balance sheet. Nationally, farmland has accounted for an average of 70 percent of all agricultural assets (1950-1999).

The dominance of land values in the agricultural balance sheet has several implications. First, sector wealth and solvency are intricately tied to farmland prices. This link between farmland values and solvency has implications for the sector's cost of capital and, concomitantly, for the sector's economic viability. Second, the value of farmland is intimately related to the structure of agriculture. The average farm size in the United States has grown rapidly since World War II. Given the fixed (or declining) area available for agriculture in the United States, this increase implies some dramatic changes in the structure of land holding over time. Prior to the agricultural financial crisis of the 1980s, the policy dilemma was predominantly the access of beginning or limited-access farmers to farmland.

However, the move to larger farms has also been accompanied by changes in the vertical integration of agriculture. Third, the emerging environmental agenda has dramatic consequences for farmland prices. In the post-war period the United States has experienced rapid economic and population growth. This growth provides an alternative use for land, increasing its price in some areas. In addition, the growth in income has increased the public's demand for environmental goods, which affects both the price and productivity of farmland. Finally, the price of farmland is affected by a host of agricultural and trade policies.





Round Table
  © 2012 Farm Foundation. All Rights Reserved. | Privacy Policy
Site Design: Vitek Design | Programming/Maintenance: Quixazure