AN ECONOMETRIC ANALYSIS OF US FARMLAND PRICES, 1941 TO 1980 (UNITED STATES)

The value of farmland in the United States comprises approximately seventy-five percent of the total value of farm assets. U.S. farmland prices have risen steadily since 1940. The period of 1970 to 1980, however, exhibits an increased rate of growth in average farmland values. Rapid farmland price inflation could have implications for the structure of the American farming sector. An increase in the concentration of control of farm production assets, the raising of barriers to entry into agriculture and pressures on rural farm financial institutions from increased leveraging of farm loans may all result from increasing farmland values. Previous research on farmland prices suffers from a number of deficiencies, including: (1) the lack of stability of models; (2) the exclusion of relevant variables; (3) the use of single equation estimation techniques; and (4) the inability to accurately forecast current farmland price movements. The purpose of this study was to overcome the problems of earlier analyses. Explicitly, a three equation model of farmland prices was developed. Hypotheses of different factors influencing farmland prices over the period 1941 to 1980 were tested and significant factors identified. Farmland price forecasts were generated using the three equation model and two univariate ARIMA models estimated in a Box-Jenkins context. Comparisons of forecasts were made based on relevant criteria