IDEAS home Printed from https://ideas.repec.org/a/eme/afrpps/afr-03-2016-0025.html
   My bibliography  Save this article

Forecasting Kansas land values using net farm income

Author

Listed:
  • Allen M. Featherstone
  • Mykel R. Taylor
  • Heather Gibson

Abstract

Purpose - With the decline of US net farm income from $123.8 billion in 2013 to $71.5 billion forecasted for 2016, concern has developed regarding the future path of agricultural land values. The purpose of this paper is to examine the relationship between net farm income, cash rents and land values in the state of Kansas and provides insight regarding future land values. Design/methodology/approach - This study estimates partial adjustment models for cash rent and land values and uses those results to infer long-run capitalization rates and earnings multipliers. These models are used to forecast Kansas land values through 2018 and also the long-run price of farmland given 2016 expectations. Findings - Land adjusts to changes in Kansas net farm income slowly with a one-year elasticity of 6.7 percent. The long-run elasticity is 96.9 percent which is very close to the 100 percent suggested by the theoretical income capitalization model. The long-run multiplier for income in Kansas is 21.71 which implies a capitalization rate of 4.61 percent. The estimated results suggest that Kansas land values would peak in 2016 and begin to slowly decline. If market conditions were to remain the same, land values would ultimately decrease to $1,171 per acre, a 28 percent decline from current levels. Originality/value - Declines of the magnitude in estimated land values could negatively affect the financial condition of the sector. Factors such as a change in the long-run capitalization rate or unexpected supply or demand shocks for agricultural commodities globally could certainly alter the long-term prospects. However, current expectations as of March 2016 suggest that farmers will face difficult conditions over the next few years.

Suggested Citation

  • Allen M. Featherstone & Mykel R. Taylor & Heather Gibson, 2017. "Forecasting Kansas land values using net farm income," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 77(1), pages 137-152, May.
    • Handle: RePEc:eme:afrpps:afr-03-2016-0025
    DOI: 10.1108/AFR-03-2016-0025
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/AFR-03-2016-0025/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/AFR-03-2016-0025/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/AFR-03-2016-0025?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Buchholz, Matthias & Danne, Michael & Musshoff, Oliver, 2022. "An experimental analysis of German farmers’ decisions to buy or rent farmland," Land Use Policy, Elsevier, vol. 120(C).
    2. Albulena Basha & Wendong Zhang & Chad Hart, 2021. "The impacts of interest rate changes on US Midwest farmland values," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 81(5), pages 746-766, February.
    3. Callahan, Scott & Ifft, Jennifer & Michaud, Clayton P., 2022. "The impact of countercyclical farm programs on agricultural land values," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322579, Agricultural and Applied Economics Association.
    4. Carson, Nathaniel & Langemeier, Michael, 2019. "Relationship between Cash Rent and Net Return to Land in Indiana," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2019.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:afr-03-2016-0025. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.