Comparison of alternative sources of farmland values

Abstract

Purpose -Consistent and reliable data on farmland values is critical to assessing the overall financial health of agricultural producers. However, little is known about the idiosyncrasies and similarities of standard land value data sources -US Department of Agriculture (USDA), Federal Reserve Bank land value surveys, and transaction prices. The purpose of this paper is to determine the differences and similarities of land value movements from three land value data sources.

The information content of farmland value surveys

“…The correlation is highest between the Federal Reserve and the USDA survey data, at 94 percent. This supports the previous findings for the state of Oklahoma provided by Zakrzewicz et al (2012). The correlation between the Federal Reserve and ISU (82 percent) and the USDA and ISU (76 percent) are much lower, yet the correlation is still significant and large.…”

Bankers’ Forecasts of Farmland Values: A Qualitative and Quantitative Evaluation

“…Instead, the Federal Reserve provides average percentage changes from the previous quarter derived from the aggregate point estimates. Prior studies demonstrate that these percentage changes and point estimates are consistent with market transaction prices (Zakrzewicz, Brorsen, and Briggeman, 2012), as well as aggregate farmland values reported by similar, annual surveys of farmers and other farmland market experts (Kuethe and Ifft, 2013).…”

“…In addition to farmland price expectations, the survey asks respondents to provide a point estimate of the average value for “good quality” farmland in their area. Because the Federal Reserve is a regulatory agency, it does not publish the survey's point estimates to prevent the information from being used as a benchmark for farmland sales (Zakrzewicz, Brorsen, and Briggeman, 2012). Instead, the Federal Reserve provides average percentage changes from the previous quarter derived from the aggregate point estimates.…”

“…As mentioned previously, the Federal Reserve does not publicly report the point estimates of farmland prices provided by the respondents. Instead, the Federal Reserve reports the estimated percentage change from the previous survey quarter (Zakrzewicz, Brorsen, and Briggeman, 2012). More specifically, if the actual value of farmland in quarter t is A t , the Federal Reserve reports the estimated percentage change from the previous quarter AP t = ln ( A t / A t − 1 ).…”

The Impact of Pasture Insurance on Farmland Values

“…Farmer-reported land values have been used in studies of the impacts of government policies on the value of farmland (e.g., Goodwin, Mishra, andOrtalo-Magné 2003, Towe andTra 2013). The farmland value data used in this study are also used to inform USDA farmland value estimates, which have been shown to be highly correlated with transaction values (Zakrzewicz, Brorsen, and Briggeman 2012). The survey uses an area frame sampling methodology in which "segments" that are approximately one square mile in size are randomly sampled.…”