Farmland Values Often
Deviate from Agricultural Use Value
November 25, 2012 — In many areas today, farmland values are influenced by factors other than agricultural productivity, such as urban influence and natural or rural amenities.
The capitalized value of expected rents (rental rate divided by 10-year Treasury note) is a broad indicator of the amount of farmland value due to agricultural use. When the ratio of farmland values to capitalized rents exceeds 1.0, it suggests a deviation between the market value of farmland and its implied agricultural use value.
In states such as Florida and New Jersey, cropland values greatly exceed their implied agricultural use value. In more rural states such as South Dakota, cropland values are mostly determined by agricultural use. This map can be found in the ERS report, Agricultural Resources and Environmental Indicators, 2012 Edition, EIB-98, August 2012.
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