The Changing Roles of Urban Influence and Agricultural Productivity in Farmland Price Determination

Abstract

Between 2000 and 2010, inflation-adjusted U.S. farmland values increased by over 80%. This period of rapid price appreciation coincided with both the agricultural commodity price boom and the broader financial crisis. This paper examines the degree to which the determinants of farmland prices changed over this period, using a panel of farmland transfer declarations from 98 Illinois counties. Hedonic price analysis demonstrates that the relative importance of urban influence decreased over this period, while the relative importance of agricultural productivity increased. The study carries important implications for farmers, farmland owners, and policy makers. (JEL Q15)