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The Determinants of Farmland Values in Canada

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  • Weerahewa, Jeevika
  • Meilke, Karl D.
  • Vyn, Richard J.
  • Haq, Zahoor Ul

Abstract

This study has examined the determinants of farmland values in Canada. The empirical results for the period 1959-2004 show that farmland values seem to be disconnected from adjusted earnings per acre regardless of model specification. Differences in model specification can change the interpretation of the importance of government payments in influencing farm land values. If a time trend is included in the land value function government payments appear to have no effect on land values; when the time trend is removed they have a statistically significant positive effect on land values. With respect to the other explanatory variables, the higher the population density, the higher farmland values, indicating that urbanization increases farmland values. Furthermore, increases in real interest rates lower farmland value as the capitalization formula suggests.

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Bibliographic Info

Paper provided by Canadian Agricultural Trade Policy Research Network in its series Working Papers with number 43461.

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Date of creation: Mar 2008
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Handle: RePEc:ags:catpwp:43461

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Keywords: land values; Canada; Agricultural and Food Policy; Demand and Price Analysis;

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References

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  1. Falk, Barry L., 1991. "Formally Testing the Present Value Model of Farmland Prices," Staff General Research Papers 11093, Iowa State University, Department of Economics.
  2. Alfons Weersink & Steve Clark & Calum G. Turvey & Rakhal Sarker, 1999. "The Effect of Agricultural Policy on Farmland Values," Land Economics, University of Wisconsin Press, vol. 75(3), pages 425-439.
  3. Campbell, John & Shiller, Robert, 1987. "Cointegration and Tests of Present Value Models," Scholarly Articles 3122490, Harvard University Department of Economics.
  4. Carl Johan Lagerkvist, 2005. "Agricultural policy uncertainty and farm level adjustments--the case of direct payments and incentives for farmland investment," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(1), pages 1-23, March.
  5. Saleem Shaik & Glenn A. Helmers & Joseph A. Atwood, 2005. "The Evolution of Farm Programs and Their Contribution to Agricultural Land Values," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1190-1197.
  6. Barry K. Goodwin & Ashok K. Mishra & Fran�ois N. Ortalo-Magné, 2003. "What's Wrong with Our Models of Agricultural Land Values?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 744-752.
  7. Anton, Jesus & Mouel, Chantal Le, 2004. "Do counter-cyclical payments in the 2002 US Farm Act create incentives to produce?," Agricultural Economics, Blackwell, vol. 31(2-3), pages 277-284, December.
  8. J. Stephen Clark & K. K. Klein & Shelley J. Thompson, 1993. "Are Subsidies Capitalized into Land Values? Some Time Series Evidence from Saskatchewan," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 41(2), pages 155-168, 07.
  9. Charles H. Barnard & Gerald Whittaker & David Westenbarger & Mary Ahearn, 1997. "Evidence of Capitalization of Direct Government Payments into U.S. Cropland Values," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(5), pages 1642-1650.
  10. Fred Kuchler & Abebayehu Tegene, 1993. "Asset Fixity and the Distribution of Rents from Agricultural Policies," Land Economics, University of Wisconsin Press, vol. 69(4), pages 428-437.
  11. Michael J. Roberts & Barrett Kirwan & Jeffrey Hopkins, 2003. "The Incidence of Government Program Payments on Agricultural Land Rents: The Challenges of Identification," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 762-769.
  12. Gardner, Bruce L., 2002. "U.S. Commodity Policies And Land Prices," Working Papers 28560, University of Maryland, Department of Agricultural and Resource Economics.
  13. Moss, Charles B. & Shonkwiler, John Scott & Reynolds, John E., 1989. "Government Payments To Farmers And Real Agricultural Asset Values In The 1980s," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 21(02), December.
  14. Ian W. Hardie & Tulika A. Narayan & Bruce L. Gardner, 2001. "The Joint Influence of Agricultural and Nonfarm Factors on Real Estate Values: An Application to the Mid-Atlantic Region," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 120-132.
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Cited by:
  1. Mela, Giulio & Longhitano, Davide & Povellato, Andrea, 2012. "The evolution of land values in Italy. Does the influence of agricultural prices really matter?," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122479, European Association of Agricultural Economists.
  2. Feichtinger, Paul & Salhofer, Klaus, 2011. "The Valuation of Agricultural Land and the Influence of Government Payments," Factor Markets Working Papers 112, Centre for European Policy Studies.
  3. Thibodeau, David R. & Clark, J. Stephen, 2009. "Government support, transfer efficiency, and moral hazard within heterogeneous regions in Canadian Agriculture," 2009 Conference, August 16-22, 2009, Beijing, China 51806, International Association of Agricultural Economists.

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