IDEAS home Printed from https://ideas.repec.org/p/ias/cpaper/07-wp454.html

Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory

Author

Abstract

Based on the Ricardian rent theory, this study employs the variable profit function to analyze the determinants of Iowa cropland cash rental rates using county-level panel data from 1987 to 2005. Accounting for spatial and temporal autocorrelations, responses of local cash rental rates to changes in output prices and other exogenous variables are estimated. We find that Iowa cash rental rates are largely determined by output/input prices, soil quality, relative location, and other county-specific factors. Cash rents go up by $79 for a $1 increase in corn price in the short run. The marginal value of cropland quality, as represented by row-crop corn suitability rating index, is about $1.05. Ethanol plants are not found to have a significant local effect on cash rental rates, impacting local rental markets mainly through the national futures price. Scale of the local livestock industry and adoption of genetically engineered crops have significant impacts on local cash rental rates. In addition, changes in crop output prices are found to have long-run effects on cash rental rates. The long-run change in cash rents is approximately $109-$114 for a $1 change in corn price and is reached in about four years. Our research may be viewed as a test of the Ricardian rent theory. We find limited support for the theory.

Suggested Citation

  • Xiaodong Du & David A. Hennessy & William M. Edwards, 2007. "Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory," Center for Agricultural and Rural Development (CARD) Publications 07-wp454, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:07-wp454
    as

    Download full text from publisher

    File URL: https://www.card.iastate.edu/products/publications/pdf/07wp454.pdf
    File Function: Full Text
    Download Restriction: no
    File URL: https://www.card.iastate.edu/products/publications/synopsis/?p=1059
    File Function: Online Synopsis
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. Du Xiaodong & Hennessy David & Edwards William A., 2008. "Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-25, December.
    2. Ibendahl, Gregory & Griffin, Terry, . "The Connection Between Cash Rents and Land Values," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2013, pages 1-9.
    3. Junpyo Park, 2022. "Distance to Biorefinery Plants and Its Influence on Agricultural Land Value: Evidence from the United States Midwest Region," Land, MDPI, vol. 11(9), pages 1-14, September.
    4. Styan, Jacob & Boerngen, Maria A. & Barrowclough, Michael J., 2021. "Factors Influencing Increased Usage of Cash Rent Leases in Illinois," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2021.
    5. Gaurav Arora & Peter T. Wolter & Hongli Feng & David A. Hennessy, 2016. "Role of Ethanol Plants in Dakotas Land Use Change: Incorporating Flexible Trends in the Difference-in-Difference Framework with Remotely-Sensed Data," Center for Agricultural and Rural Development (CARD) Publications 16-wp564, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    6. repec:isu:genstf:201101010800001360 is not listed on IDEAS
    7. Arora, Gaurav & Wolter, Peter T. & Feng, Hongli & Hennessy, David A., 2015. "Role of Ethanol Plants in Dakotas’ Land Use Change: Analysis Using Remotely Sensed Data," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205877, Agricultural and Applied Economics Association.
    8. Saguatti, Annachiara & Erickson, Kenneth & Gutierrez, Luciano, 2014. "Spatial panel models for the analysis of land prices," 2014 Third Congress, June 25-27, 2014, Alghero, Italy 172997, Italian Association of Agricultural and Applied Economics (AIEAA).
    9. Miao, Ruiqing, 2013. "Impact of Ethanol Plants on Local Land Use Change," Agricultural and Resource Economics Review, Cambridge University Press, vol. 42(2), pages 291-309, August.
    10. repec:isu:genstf:201701010800007133 is not listed on IDEAS
    11. Ibendahl, Gregory A., 2012. "The Connection Between Cash Rents and Land Values," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 120055, Southern Agricultural Economics Association.
    12. Baylis, Kathy & Paulson, Nicholas D. & Piras, Gianfranco, 2011. "Spatial Approaches to Panel Data in Agricultural Economics: A Climate Change Application," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(3), pages 325-338, August.
    13. Chen, Y. & Chen, K. & Zhong, F., 2018. "Farm Subsidy and Farmland Cash Rent under Rapid Urbanization: Evidence from Chinese Farm Household Panel 2004-2013," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277513, International Association of Agricultural Economists.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

    Statistics

    Access and download statistics

    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:ias:cpaper:07-wp454. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/caiasus.html .

    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.