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Land Values Have Much To Do With Government Supports

In the last installment of the Road Warrior, we examined the non-agricultural factors influencing cropland values. In this segment, let’s examine the Kansas State study and discuss the amount of government supports attributed to the agricultural cropland value.

Surprisingly, agricultural cropland in the Southern Plains and the Southeast is most influenced by government payments. For example, in Oklahoma, Texas and New Mexico, 63%, 100% and 89% of the cropland value, respectively, is attributed to government payments. Mississippi, Alabama, Georgia and South Carolina’s agricultural value is closely tied to government supports, ranging from 65 to 87% of the value attributed to supports. The Upper Midwest ranges from 30 to 50% of value in agricultural return from government supports, while the Northwest and Eastern Corn Belt are at the 25% level.

An area from North Dakota to Texas finds that if government supports were eliminated in total, land values would decline by 25-40%. Other areas such as the Southeast, which have non-agricultural factors influencing value, would generally observe less than a 15% decline on average.

Negotiations in the next Farm Bill could have a large impact on the balance sheet of agriculture. With emphasis in the Farm Bill on energy, environment and conservation, business as usual could be the mode of operation concerning land values.

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Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.