What drives competition on the farmland market? A case study in Brittany (France)

Piet, Laurent; Melot, Romain; Diop, Soukeyna

doi:10.1093/erae/jbaa019

Cited by 6 publications

(3 citation statements)

References 49 publications

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“…for instance, high-quality soils attract more bidders with a higher willingness to pay, a known factor in Saxony-Anhalt (e.g., Seifert, Kahle, and Hüttel 2021). Likewise, larger lots with a higher share of arable land attract more bidders and achieve higher prices (Ritter et al 2020;Piet, Melot, and Diop 2021). Farmer bidders may benefit from economies of scale by larger plots, and non-farmer buyers intending to generate income from leasing the purchased land may benefit from finding solvent farmer-tenants at a lower cost (Hüttel et al 2020;Curtiss et al 2021).…”

Section: Discussionmentioning

confidence: 99%

“…In the empirical specification we shift both competition measures by one to the left to account for the support of the negative binomial distribution that has a positive probability of values being zero. This approach is commonly used when analyzing auction count data that structurally exclude zero observations (Jaggia and Thosar 1993;Hattori 2010;Piet, Melot, and Diop 2021).…”

Section: Two-step Proceduresmentioning

confidence: 99%

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Tenant Favoritism and Right of First Refusals in Farmland Auctions

2022

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Rights of First Refusals (RFRs) granted to tenants in land privatization auctions enable them to purchase their leased land by accepting the highest bid. RFRs may however deter bidders and incentivize non-right holders to adjust their bidding. We conjecture that tenant favoritism with RFRs reduces competition and thus sales prices at the expense of the public sellers. To test the conjectures, we compile a dataset of land auctions by two privatization agencies in eastern Germany, one favoring tenants along with an RFR, between 2007 and 2018. Double-robust matching results indicate RFR-related reductions in the number of bidders and prices.

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Section: Discussionmentioning

confidence: 99%

Section: Two-step Proceduresmentioning

confidence: 99%

Tenant Favoritism and Right of First Refusals in Farmland Auctions

2022

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“…Rising farmland prices in Saxony-Anhalt and many other regions (Bigelow et al, 2020;Odening and H€ uttel, 2020) have been traced back to, among others, increased competition due to increasing demand by investors (Piet et al, 2021), capitalization of agricultural policy (e.g. Moss and Katchova, 2005;Feichtinger and Salhofer, 2013), and increasing measures for renewable energy policy (e.g.…”

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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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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