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The Impact of Farmland Price Changes on Farm Size and Financial Structure

Author

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  • J. DeBoer-Lowenberg
  • Michael Boehlje

Abstract

A modified Vickers model is used to show that farmland capital gains provide incentive to increase farm acreage and debt use. Farmland capital losses have the opposite effect. The model indicates that part of the current financial vulnerability of the U.S. farm sector can be traced to management decisions made in response to the farmland capital gains of the 1970s. The effects are not purely tax driven, though taxes can affect the magnitude of incentives. The Vickers model is modified to allow a finite horizon, taxes, and the recognition of unrealized capital gain or loss.

Suggested Citation

  • J. DeBoer-Lowenberg & Michael Boehlje, 1986. "The Impact of Farmland Price Changes on Farm Size and Financial Structure," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 838-848.
    • Handle: RePEc:oup:ajagec:v:68:y:1986:i:4:p:838-848.
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    File URL: http://hdl.handle.net/10.2307/1242130
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    Citations

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    Cited by:

    1. Jeremy G. Weber & Nigel Key, 2014. "Do Wealth Gains from Land Appreciation Cause Farmers to Expand Acreage or Buy Land?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1334-1348.
    2. Prager, Daniel & Tulman, Sarah & Durst, Ron, 2017. "How do tax loss benefits and asset appreciation affect the returns to farming for U.S. farm households?," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266304, Agricultural and Applied Economics Association.
    3. Boehlje, Michael, 1990. "Alternative Models Of Structural Change In Agriculture And Related Industries," Staff Papers 14098, University of Minnesota, Department of Applied Economics.
    4. Jeremy G. Weber & Nigel Key, 2015. "Leveraging Wealth from Farmland Appreciation: Borrowing, Land Ownership, and Farm Expansion," Land Economics, University of Wisconsin Press, vol. 91(2), pages 344-361.
    5. Weber, Jeremy G. & Key, Nigel D., 2013. "Does proprietor wealth influence small business decisions? Land appreciation and farm business borrowing, land ownership, and output," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150408, Agricultural and Applied Economics Association.
    6. Featherstone, Allen M., 1990. "Optimal Capital Structure as Business Risk Changes," 1990 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk Meeting, January 28-31, 1990, Sanibel Island, Florida 271544, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    7. Smith, Joyotee & Cadavid, JoseVicente & Rincon, Alvaro & Vera, Raul, 1997. "Land speculation and intensification at the frontier: a seeming paradox in the Colombian savanna," Agricultural Systems, Elsevier, vol. 54(4), pages 501-520, August.
    8. Burns, Christopher & Key, Nigel & Tulman, Sarah & Borchers, Allison & Weber, Jeremy, 2018. "Farmland Values, Land Ownership, and Returns to Farmland, 2000-2016," Economic Research Report 276249, United States Department of Agriculture, Economic Research Service.
    9. Czyżewski, Bazyli & Trojanek, Radosław, 2016. "Drivers of agricultural land prices in terms of different functions of rural areas in Poland," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 249742, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    10. Michael Boehlje, 1992. "Alternative models of structural change in agriculture and related industries," Agribusiness, John Wiley & Sons, Ltd., vol. 8(3), pages 219-231.
    11. Erickson, Kenneth W. & Moss, Charles B. & Mishra, Ashok K., 2002. "The Measurement Of Inequality In Canadian And U.S. Agricultural Income By Components Of Net Value Added," 2002 Annual meeting, July 28-31, Long Beach, CA 19866, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Kim, C.S. & McElroy, Robert G. & Mishra, Ashok K. & Hallahan, Charles B., 2002. "Biased Biased Technological Progress In The U.S. Farm Sector: A Structural Perspective," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36526, Western Agricultural Economics Association.
    13. B. James Deaton & Chad Lawley, 2022. "A survey of literature examining farmland prices: A Canadian focus," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(2), pages 95-121, June.
    14. Weber, Jeremy G. & Wall, Conor & Brown, Jason P. & Hertz, Tom, 2013. "Crop Prices, Agricultural Revenues, and the Local Economy of the U.S. Heartland," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150404, Agricultural and Applied Economics Association.
    15. Fertő, Imre, 2002. "A mezőgazdasági termelés szerkezetének változásai a fejlett országokban, II. Az üzemnagyság és a mérethozadék problémája a mezőgazdaságban [Changes in the structure of agricultural production in th," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 760-773.

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