Measuring liquidity in agricultural land markets

Kionka, Marlene; Odening, Martin; Plogmann, Jana; Ritter, Matthias

doi:10.1108/afr-03-2021-0037

Cited by 6 publications

(6 citation statements)

References 57 publications

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“…Based on our empirical findings, we conclude that understanding lease term effects on farmland prices requires acknowledging price trends and related expectations of agents, costs of being information deficient, and the market power relation between buyers and sellers. In this regard, the local market microstructure matters, such as the number of potential buyers and sellers, reflected for instance by land concentration and fragmentation (Balmann et al, 2021;Kionka et al, 2021). We note that fields in Saxony-Anhalt are usually larger than 20 ha -more than five times larger than the average sold lot.…”

Section: Discussionmentioning

confidence: 94%

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How does tenancy affect farmland prices? Effects of lease status, lease term and buyer type

Humpesch¹,

Seifert

Balmann

et al. 2022

AFR

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PurposeLease contracts at the time of sale influence buyers' expectations about future returns of farmland ownership and may thus contribute to price dispersion. This paper investigates the conjecture that existing land lease contracts influence buyers' and sellers' costs of being information deficient and thus their bargaining position, their expectation formation about future returns, and thus ultimately the farmland price.Design/methodology/approachThe authors link different levels of information, search, and bargaining costs to three buyer types and their land use intentions. Relying on a rich dataset of farmland transactions in the German Federal State of Saxony-Anhalt from 2014 to 2019, the authors use a hedonic pricing model to investigate five hypotheses applying multivariate one-sided tests.FindingsThe authors find buyer-specific effects related to lease status and lease term of a lot. Tenant buyers pay less than non-farmer buyers for leased lots, whereas non-tenant farmers pay a markup. While prices decrease for all buyer groups with an increasing lease term, this effect is the strongest for non-tenant farmer buyers. This study’s results suggest that an existing lease contract impacts buyers' costs of being information deficient, their bargaining positions and expectation formation, and ultimately the price discovery process.Originality/valueTo the authors’ knowledge, this is the first study that decomposes the effects of tenancy on farmland prices by buyer type and lease term. The study provides insights into price dispersion for identical characteristics of farmland and explains why empirical studies have found mixed or no empirical evidence that lease contracts influence the price discovery process.

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Section: Discussionmentioning

confidence: 94%

“…In this regard, the local market microstructure matters, such as the number of potential buyers and sellers, reflected for instance by land concentration and fragmentation (Balmann et al. , 2021; Kionka et al. , 2021).…”

Section: Discussionmentioning

confidence: 99%

How does tenancy affect farmland prices? Effects of lease status, lease term and buyer type

Humpesch¹,

Seifert

Balmann

et al. 2022

AFR

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“…Due to urbanisation pressure, available farmland is in decline [33]. Moreover, farmland is often transferred within the family, making it so that only a very small percentage of available farmland is transacted through the market [34,35].…”

Section: Markets and Market Trendsmentioning

confidence: 99%

Access to Land: Markets, Policies and Initiatives

Altes

2023

Sustainability

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Acquiring access to land is an important issue for new entrants into farming. Traditionally, the succession of farms is within the family; market transactions are geared towards the enlargement of running farms. Policies and institutions have been built to facilitate this process. Current challenges of climate change, resource scarcity, biodiversity and equity, as are analysed by the Intergovernmental Panel on Climate Change (IPCC), the International Resource Panel (IRP), the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) and the Sustainable Development Goals (SDGs) reporting activities, make it so that there is a need to find alternatives for the current developments in farming, which is a process of up (scale enlargement) or out (stop farming). For these alternatives, new types of farmers who face the issue of access to land are needed. Based on FADN data and EUROSTAT data, current developments in the European farming sector were analysed to understand the impact of the process of modernisation on farmland markets and the complexities of access to land for new entrants. Whether these data may point to opportunities for alternative farming methods and the role of the direct payments of the European Union’s Common Agricultural Policy were analysed. Policies and consequences are discussed. It is concluded that, whereas alternative farming models are promoted at the level of policy aims, this is not performed at the policy guidance level of land markets. Alternatives outside traditional institutions face the issue of scaling up to create impact. The Common Agricultural Policy is, in many ways, more of an obstacle than it is a promoter of providing access to land for new farmers. New policies are needed.

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“…In the research related to the farmland market, market failures are a widely discussed topic. Issues such as market concentration [22,23], lack of liquidity [24] or asymmetric information [25,26] exist in farmland markets. Hence, the demand for regulatory instruments is understandable.…”

Section: Literature Reviewmentioning

confidence: 99%

An Analytical Framework for Evaluating Farmland Market Regulation: Examining the German Land Transaction Law

Meissner

Kappenberg

Mußhoff

2022

Land

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Farmland market regulation and related political interventions are prominent in the current discussion, in particular, because the market faces big price increases. This discussion is often shaped by subjective and emotional perceptions. Its complexity is increased by the considerable number of affected parties and opposing arguments. The parties involved may be focused on different aspects and have different requirements with regard to farmland market regulation instruments. The objective of this paper is to present an analytical framework for more efficient observation and evaluation of the ongoing discussion. The framework was developed using information about the relevant political interventions to structure the arguments and parties. It allows for a holistic evaluation of farmland market regulation. To provide an example of how farmland market regulation can be analyzed, the German land transaction law was broken down by process, parties, and arguments. Within the analytical framework, arguments are weighted individually. As a result, the various farmland market instruments can be discussed in a structured way. Additionally, the framework provides information about the utility of the respective instruments in defined cases from different perspectives.

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Measuring liquidity in agricultural land markets

Cited by 6 publications

References 57 publications

How does tenancy affect farmland prices? Effects of lease status, lease term and buyer type

How does tenancy affect farmland prices? Effects of lease status, lease term and buyer type

Access to Land: Markets, Policies and Initiatives

An Analytical Framework for Evaluating Farmland Market Regulation: Examining the German Land Transaction Law

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