By Jamie Martin
U.S. farmland values have been rising faster than cash rent for many years. One-way experts measure this change by comparing cropland prices with cropland rental income. Since 1998, this ratio has nearly doubled, say Carl Zulauf, Department of Agricultural, Environmental and Development Economics, Ohio State University and Bruce Sherrick, Department of Agricultural and Consumer Economics.
In the late 1990s, the average ratio was about 20. By 2025, it reached 36. If this growth had not occurred, cropland prices today could be more than 40% lower. This shows that farmland has become much more expensive than its income potential would suggest.
A longer review using USDA data shows that land values were more balanced with rent income before the mid 1990s. Since then, the ratio has steadily increased, with noticeable jumps during the late 1970s, mid 2000s, and after 2020.
These growth periods followed times of higher crop income and stronger demand from renewable fuel markets. Even when market corrections happened later, land prices did not return to earlier levels.
Researchers have tested many possible explanations, including crop prices, biofuel demand, interest rates, and farm support payments. None has shown a strong statistical influence on the yearly movement of land to rent ratios. This suggests that other market forces may be shaping farmland values.
Farmland represents about 80% of total farm assets in the United States. Rising land prices can improve equity for landowners but also raise challenges for buyers and new farmers. High values may limit access to land and increase borrowing costs.
Experts say understanding why land prices continue to rise faster than rent is important for long term farm stability. More research is needed to guide policies and protect future generations of producers.
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Categories: National