Farmland Prices and the Real Interest Rate on Farm Loans

While economists agree on the importance of returns to land as a determinant of farmland prices, they disagree about the role of interest rates and inflation. Analysis of farmland prices for the conterminous United States, the Corn Belt, and wheat-growing areas of Kansas showed that the real interest rate on farm mortgages has only a minimal temporary effect on farmland prices before 1972. The real interest rate along with returns have become major determinants of farmland prices since then. Changes in the inflation rate will affect real farmland prices if nominal interest rates fail to keep up with inflation.

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Journal Article
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Journal of Agricultural Economics Research, Volume 42, Number 1
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 Record created 2017-04-01, last modified 2018-01-22

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