Farmland returns and economic conditions: a FAVAR approach

Agric. resour. econ. rev.

2014

This study examines the impact of publicly supported insurance on agricultural land values. The analysis employs confidential, nationally representative panel data on field-level pastureland values and exploits a natural experiment provided by gradual introduction of the Pasture, Rangeland, and Forage Insurance Pilot Program. We use a field-level fixed-effects model that controls for several time-variant factors. We find that insurance availability is associated with an increase of at least 4 percent in pastureland values. This increase is comparable with increases generated by other government programs but is much smaller than total farmland value increases experienced in recent years.

Section: Methodsmentioning

confidence: 99%

The Impact of Pasture Insurance on Farmland Values

Ifft

Agric. resour. econ. rev.

2014

“…At a parcel level, farmland prices are determined by a complex set of factors, including agricultural productivity, locational amenities, and farm policy (Ifft, Kuethe, and Morehart, 2015). In addition, a number of economic factors, including broader real estate market trends and overall macroeconomic conditions, influence the dynamics of aggregate farmland prices (Kuethe, Hubbs, and Morehart, 2014; Stokes and Cox, 2014). However, a growing body of literature suggests that subjective forecasts of economic variables derived from aggregate opinions of market participants and experts may outperform traditional empirical forecasts (see Faust and Wright, 2013).…”

Section: Introductionmentioning

confidence: 99%

Bankers’ Forecasts of Farmland Values: A Qualitative and Quantitative Evaluation

Hubbs

2017

J. Agric. Appl. Econ.

Self Cite

Abstract. This study evaluates the farmland price forecasts provided by the Federal Reserve Bank of Chicago's Land Values and Credit Conditions Survey from 1991: quarter 1 (Q1) through 2016: Q1. Prior studies have demonstrated that similar surveys of agricultural bankers provide accurate predictions of the direction of future farm real estate values through qualitative forecast evaluation. This study extends the existing knowledge base by converting the qualitative responses to quantitative expectations. The quantified expectations are then subjected to additional forecast optimality tests, which suggest that the forecasts are unbiased but inefficient.

“…While the existing literature provides many potential specifications of the asset pricing model of farm real estate, the ICAPM captures the linkages between farmland returns and broader macroeconomic forces which have been shown to be a significant driver of farm real estate returns (Kuethe et al, 2014). A similar model was applied to farmland returns by Bjornson (1995) and to the returns to residential real estate by Voicu and Seiler (2013).…”

Section: The Consequences Of the "Bad Data" Problem In Prior Researchmentioning

confidence: 99%

The risk and return of farm real estate and the “bad data problem”

Agricultural Finance Review

2016

Purpose – The purpose of this paper is to explore the consequences of appraisal smoothing in the estimation of the risks and returns of farm real estate. It examines the degree to which the risk and return characteristics of farm real estate are an artifact of the methods used to measure aggregate property values. Design/methodology/approach – A multifactor asset pricing model is estimated using farm real estate returns in a manner consistent with prior research, as well as using farm real estate returns calculated using two synthetic unsmoothing procedures developed in the real estate finance literature. Findings – The model suggests that unsmoothed farm real estate returns exhibit characteristics that differ from those suggested by prior research. The unsmoothed returns suggest a stronger correlation with economy wide investment risks. Originality/value – This is the first study to evaluate the impacts of appraisal smoothing in a farm real estate context. It provides a simple framework for addressing many of the pricing anomalies associated with farmland.