Direct Payments And Cropland Values

[Jim Meade / Iowa City]

Here's an academic study that suggests that every dollar of direct payments is converted to $18 in the value of the affected cropland.

http://farmdocdaily.illinois.edu/2015/05/influence-of-direct-payments-on-cropland-values.html

Direct payments are only one aspect of capitalizing policy into farm value.  The study provides a link to the big picture.

[sw363535]

Why didn't land prices lower when direct payments stopped?

Or when grain prices lowered 40%?

Neither are driving land prices as thought.

[WCMO]

Didn't look to find explanations or sources relevant to ag land prices, yet my long-ago studies in Economics called this something like  "nominal rigidity" or the concept of "sticky prices".  Yet, you can look up these terms, and read the information with ag land pricing or perceived values in mind.

Later -- I looked a little to see if I could find any articles that related these concepts to ag land values, just a google search.  Didn't really find anything.  I hypothesize that these concepts do apply to ag land valuations, not necessarily the same arguments as for wages or unemployment, or consumer product pricing, yet similar concepts.  Would probably be a decent area of study for a masters or doctoral student at some ag university.

[Kay/NC]

I wonder how much foreign investment in American ag lands is possibly still driving prices.  It was said to be a factor a couple of years back. 

My brain is too muddled to absorb the gist of the article today.  Am I right in saying that each $1 in annual Direct Payments resulted in $18 per acre in increased land value?  If so, would the average taxpayer say he or she was being expected to foot the cost for a farmer's benefit? 

[WCMO]

I would guess that the AVERAGE taxpayer thinks that.  Still, even if farm programs averaged $20/acre, that x $18, is $360/acre.  That might be as much as 10% of the farm value increase during the life of the Direct payments, probably less.

[sw363535]

Probably the worst article I have seen from Illinois...

There is just not much factual justification for the conclusion...

You have to exclude other contributors to land prices to reach that conclusion.

And since Direct payments stopped two years ago, where is the resulting adjustment?

A huge money supply and "dirt" cheap interest is still the big factor along with the fact that there are not many other safe investments for savings cash...CD interest makes land look like a good buy at a pretty high price......  IMO...... Even if it is not....

[Kay/NC]

You have to ask yourself where to stash some cash these days...certainly not in CDs.

[k-289]

If our legislature passes a pending bill you can '' invest ''   $$$ in HOG facilities for Smithfield ---

[Kay/NC]

Been there, done that...big enough. Diversifying.

[sw363535]

Elcheapo has been making light of it..... but is there a business on main street that you would consider a good investment these days....?

Even the fast food and chain resteraunt ideas are pretty well "run the course".....

Unbelievable that there is unlimited, low cost, funds available and a limited number of places to securely invest it...