Farmland values have increased rapidly over the last decade in response to high incomes for crop farmers and inordinately low interest rates. Farmers have responded to these conditions by bidding up the price of good cropland. In addition, the long period of increasing land values, since the last farm financial crisis in the 1980s, has generated interest by outside investors who see farmland as a safe haven that offers a relatively high annual rate of appreciation. The result is a period of high demand for an essentially fixed supply. The last time this situation occurred was in the late 1970s and early 1980s, and it was followed by a major downward revaluation of farmland values when interest rates spiked and demand stagnated. The paper suggests that a repeat of these events is likely this time as well. Even though farmers do not appear vulnerable to a “balance sheet crisis” as they were in the 1980s, the history of American agriculture is cycles of boom and bust. In addition, there is some reason to believe that changes in the drivers of production , specifically the importance of proprietary seed and pesticide technologies are shifting economic rents away from landowners toward input suppliers.


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