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Components of Cropland Value in the Cornbelt


Farmland markets have received a great deal of attention as farm income has come under pressure due to lower and more volatile commodity prices, and as recent actions by the Federal Reserve have led to increased concern about capitalization rates for real assets such as farmland. Previous farmdoc daily posts have provided an outlook for farmland prices as well as discussions of some of the impacts of government policies on the asset class. In this post, we provide a unique view of the some of the fundamental drivers of cropland values across the central Cornbelt and show the relative impact of different factors influencing value. In particular, a view is developed of the “dollars per soil quality point” heuristic that many growers and investors use to make purchase and rental decisions, finding wide variation in that rule’s performance and that other attributes, especially economic attributes such as taxes and local grain basis should also be taken into account in describing relative cropland values.

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