Progress 07/01/00 to 06/30/06
Outputs
Investigator deceased.
Impacts
This project was not initiated due to untimely death of investigator.
Publications
- No publications reported this period
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Progress 01/01/05 to 12/31/05
Outputs
Results of econometric analysis of farmland values in southwestern Idaho indicate that the primary factor affecting values is soil productivity. However, analysis focusing specifically on the Boise metro area (Ada and Canyon counties) indicate that significant determinants of farmland values in the area are distance from large towns and cities (greater than 10,000 population), and number of acres in each parcel of soils in each USDA, NRCS soil capability class (measures of productivity). Values were found to decline $88.47 per acre for every mile in distance from the nearest town with more than 10,000 residents. The most productive parcels were found to have high values. Parcels of medium productivity were found to have significantly less value. However, parcels of low productivity were found to have values almost as great as those of the most productive parcels. Information from local leaders suggests that this is due to planning and zoning efforts to put development
on less productive land.
Impacts
The Boise metro area contains some of the best agricultural land in Idaho. Econometric results of this research will specifically help Boise area land use policy makers, appraisers,and land owners understand how local development affects farmland values. These results will also help such persons in other places have better general understanding of development affects on farmand values.
Publications
- No publications reported this period
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Progress 01/01/04 to 12/31/04
Outputs
Efforts continued to test the conceptual model developed in South-Central Idaho(of how development pressure affects farmland values) in other geographic areas. Specifically, models similar to the South-Central Idaho models were developed for South-West Idaho. South-West Idaho has experienced, and continues to experience substantial development pressure associated with the increased economic activity and population growth in the Boise metro area. Initial results from South-West Idaho indicate that values of large parcels of farmland (greater than 100 acres) are largely determined by the agricultural productivity of the land. However, values of smaller parcels (less than 100 acres)are largely determined by proximity to large communities (towns with populations greater than 10,000). Research effort addressing these issues will continue at least until this project terminates (June 30, 2005). At least two more journal articles are expected to come from project related
research.
Impacts
Project research results continue to be used to assist land-use policy makers in several Idaho counties (and in one situation in a nearby Washington county). Research results are also incorporated into extension programs involving working with rural appraisers.
Publications
- No publications reported this period
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Progress 01/01/03 to 12/31/03
Outputs
Analysis of how development pressures affect farmland values was continued. There is considerable interest in protecting existing agricultural economic bases in areas of rapid suburban sprawl by establishing protection for farmland from non-agricultural development. Policy makers addressing this concern need information about which lands are under the most pressure. Econometric models were used to determine the effects of development related characteristics on values of agricultural lands that were thought to have development potential in South-Central Idaho. Results indicate that the value of development increments for agricultural parcels (the difference in actual value of a parcel and its agricultural value) could be explained with development related variables such as distance to roads and distance to towns (Wright, et al.). Efforts were begun to test the conceptual model developed in South-Central Idaho (of how development pressure affects farmland values) in
other geographic areas. Early results from research in the rapidly developing rural area adjacent to Boise (South-West Idaho) indicate that the farmland valuation methods developed and tested in South-Central Idaho can be used in areas under more substantial development pressure (Nelson and Schumaker). This research will continue in 2004. In addition, results of farmland value research are being combined with regional economic models to evaluate total local economic benefits derived from farmland relative to the land's value for development (Nelson, et al.).
Impacts
Research results discussed here were used to assist land-use policy makers in several Idaho counties. This information facilitated more well informed decisions and educational programs about land-use policy and practice.
Publications
- Nelson, James R., Jerold D. Neufeld and Steve Peterson. "Using Regional Economic Analysis Tools to Address Land Use Planning Issues." Journal of Extension, Vol. 41, No. 5, October 2003.
- Nelson, James R. and Sarah Schumaker. "Utilization of Income Multipliers To Evaluate Development Pressures on Farmland In Canyon County, Idaho," Northwest Journal of Business and Economics, pp. 13-19, 2003.
- Wright, Khaliela, Orestes H. Vasquez and James R. Nelson. "Protecting Farmland From Development -- How To Determine Which Lands Are Under the Most Pressure," Journal of the Southwest Economics Association, Vol. V, No. 2, pp. 86-98, March 2003.
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Progress 01/01/02 to 12/31/02
Outputs
Analysis of how development pressures affect farmland values was continued. Focus was on irrigated farmland in South-central Idaho. Research reported in last year's report indicated that Income multipliers (IM's), defined as the ratio of market value of farmland to gross land rent from agriculture, can be used to quantify the effects of development pressure on farmland values. Farmland values have two components: 1) agricultural value, and 2) development value increment which is the difference in actual value of a parcel and its agricultural value. Therefore, as development pressure increases, the IM increases, ceteris paribus. Income Multipliers (IM) were determined for farmland parcels sold in South-central Idaho by dividing total sale value of each tract by gross rent of the tract. Regression models were developed with IM's as dependent variables and agricultural and development related land characteristics as independent variables. Regressions were then run
iteratively as parcels with low IM's were removed. Goodness of fit of models improved during this iterative process until all tracts with IM's less than 20 were eliminated. IM's less than 20 indicate that agricultural returns to land values are greater than 5% of land value, suggesting that little, if any, of the land value is attributable to development (all is attributable to agriculture). Tracts with IM's greater than 20 have an additional value that does not seem to be attributable to agriculture. The influencing factor is likely to be residential or commercial development. A Chow test was run which documented that parcels with IM's greater than 20 are from a different population than those with IM's less than 20. Development increment values were calculated for farmland parcels with high (>20) income multipliers. Regressions were run on development increments with agricultural and development related land characteristics as independent variables. Development increments were found
to be explained by 'parcel sale price,' 'distance to nearest U.S., state or major county road,' and 'distance to nearest community.' So findings of this research indicate that: 1.)Farmland parcels that are under development pressure can be identified with statistical methods, 2.)Development increment values can be estimated for such parcels, and 3.)These development increment values can be explained by non-agricultural, amenity based variables. More research on evaluating development pressure on farmland is needed, especially to consider whether the ideas and methods presented in this report can be applied effectively in other areas. Preliminary work has been done to evaluate impacts of development pressure on farmland values in the Boise area of Southwest Idaho. This area has been under strong development pressure for about 10 years. Results of this preliminary research suggest that income multipliers and other coefficients that measure development pressure (possibly ratios of
development increment values to total parcel values) can be used to effectively evaluate development pressure on farmland in an area under such high development pressure. Follow-up to this preliminary research is underway.
Impacts
Agricultural related determinants of values of farmland are well understood and well documented in the literature of agricultural economics. However, development pressure has substantial influence on farmland prices in many areas of the U.S. today, and such pressure is increasing and less well understood. Information about determinants of farmland values should be of interest to land owners, appraisers, assessors, real estate brokers and developers. In addition, information about the impacts of development pressure on farmland, should be especially useful to local government officials and decision makers with nonprofit entities who are working to preserve farmland and agricultural areas by use of such mechanisms as purchasable development rights, transferable development rights and farmland trusts.
Publications
- Nelson, James R., Orestes H. Vasquez, and Joel R. Hamilton. 2002. "Regression Analysis to Determine the Effects of Land Characteristics on Farmland Values in South-Central Idaho," Journal of the American Society of Farm Managers and Rural Appraisers.
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Progress 01/01/01 to 12/31/01
Outputs
In-depth analysis of factors affecting farmland values in South-central Idaho have been completed (reported in article listed herein, in other papers and in other articles under review and forthcoming). The hedonic pricing technique was used to determine the effect of specific attributes on farmland values in South-central Idaho. The following specific conclusions were generated by the study: 1. Two farmland markets exist in South-central Idaho, one for small size tracts and the other for large tracts, smaller tracts having a higher equilibrium price per acre than larger tracts. 2. Time has an influence on farmland values. Generally tract values increase throughout time. However, in the study area, and likely in other local areas, negative local economic conditions often override the general upward pressure of time (inflation, increased productivity) for individual years. 3. Farmland values decline as elevation and slope increase. Elevation affects growing season,
thus increases risk and reduces crop alternatives. Slope increases erosion potential and increases cost of farming. 4. As soil productivity increases, farmland values increase. More productive soil will lead to greater returns on farmland. 5. Net farm income increases farmland value. As farming units have greater disposable income, demand for farmland increases, leading to an increase in value. The above results are being utilized by farmland appraisers as they consider what variables they should include in their analyses of farmland values in the study area and in similar areas. Further research determined that development related characteristics on farmland (distance from town, distance from roads, elevation, county population) affect farmland income multipliers (IM's) (IM = parcel value/gross rent). Conceptually, an income multiplier is the inverse of a capitalization rate. Results indicate that high IM's on farmland are caused by development related variables, indicating that IM's
can be used to evaluate, at least in an ordinal sense, development pressures on farm farmland values. Comparative analyses of agricultural income multipliers for farmland for which farming is truly the highest and best use, and of agricultural multipliers for farmland that is under high pressure for conversion to development, should yield good estimates of the agricultural value and the development value increment components of the farmland with development potential. This information could be quite useful to local government officials and decision makers with nonprofit entities who are working to preserve farmland and agricultural areas by use of such mechanisms as purchasable development rights, transferable development rights and farmland trusts.
Impacts
Project results to date will be useful to appraisers, public policy makers (such as planning and zoning boards), local government officials (such as county assessors), and current and prospective land owners as they try to evaluate economic pressures on farmland values. Appraisers can use results to determine important variables in appraisal process for study area and similar areas. Policy makers can use results to better understand pressures to develop farmland and related issues (use value, value of development rights, patterns of development).
Publications
- Nelson. James R., Orestes H. Vasquez, and Joel R. Hamilton. "Use of Agricultural Land Values and Capitalization Rates (or Income Multipliers) to Evaluate Demand for Farmland Conversion to Nonagricultural Uses," Southwestern Economics Journal, Vol. IV, No. 2, October 2001.
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Progress 01/01/00 to 12/31/00
Outputs
Work is proceeding on objectives 1 and 2 (analyze recent farmland market developments for Idaho, and evaluate investment performance of farmland in Idaho). Trends in farmland values, and factors affecting farmland are being analyzed for major irrigated (Snake River) farming regions in south-central Idaho (Magic Valley) and southwestern Idaho (Treasure Valley). Preliminary analysis confirms that, when they exist, hedonic factors not related to agricultural productivity have substantial impacts on farmland values; and they exist in many parts of the two regions for which data are currently being analyzed. Regression techniques are being utilized to analyze data. Also, more simple methods are being evaluated. Hedonic regressions are clearly useful to evaluate marginal effects of individual factors on land values. However, such models can only evaluate factors that can be explicitly or implicitly identified and quantified. Also, constituents interested in land value
information (farmers, land lords, lenders, appraisers, assessors, land use boards, etc.)find measures of marginal effects of specific factors that affect land values of limited use. Consequently, analysis is being done of the potential usefulness of income multipliers (net returns to land divided by land value) to evaluate overall pressures on farmland prices from nonfarm sources (generally development). Income multipliers are conceptually equivalent to "price/earnings ratios" that are commonly used by investment analysists to evaluate stock market investments. Such multipliers do not indicate specific effects on land values of individual variables. It seems that they can, however, serve as at least ordinal (if not cardinal) measures of the general market levels of development pressures on land values. Preliminary efforts are underway to evaluate investment performance of farmland, and to examine how farmland investments may fit into efficiently diversified investment portfolios.
Alternative models are being evaluated to measure risk or variability in farmland values over time.
Impacts
Discussions with rural development practioners indicate thet the work being done on evaluating and interpreting farmland income multipliers may be very useful to persons with stakes in land use planning, since these multipliers can be used to identify rural areas that are under the most development pressure, and can conceivably be used to estimate the "farm productive value" and the "development value" of such land.
Publications
- Nelson, James R., Orestes Vasquez, and Sarah Schumaker, 2000. "Use of Agricultural Land Values and Capitalization Rates to Evaluate Demand for Farmland Conversion to Nonagricultural Uses." Presented at the Annual Meeting of the Southwestern Economics Association, Galveston. (Accepted for publication in the Southwestern Journal of Economics).
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