What is in this article?:
- Soaring farmland values have led many people to raise the question of whether or not farmland is on a speculative ‘bubble’ and due for a price correction.
- Strong economic fundamentals—rising incomes and a limited number of farms for sale—appear to be driving recent land price gains.
- Farmland values will be shaped by economic returns and the highly volatile markets make the future path of farmland values very uncertain.
Who Owns Farmland?
A significant factor when considering the current increase in land values and future sales is the age of the landowner. Although national data has limitations, it provides ample evidence that the farmland owners are aging and that there is an increasing percentage of the land owned by people in the older age cohorts.
A 1999 national study, in conjunction with the 1997 Census of Agriculture, discussed the age structure of American farmland owners. The study found that 28 percent of the owners with 29 percent of the land were over 70 years of age (USDA, 1999). In comparison, a similar report in 1988 using 1987 Census data reported 25 percent of the owners were over 70 years of age. In just one decade there was a 3 percent increase in the percent of farmland owners over 70 years of age.
Since 1956, Iowa State University has conducted a land ownership survey every five years. These studies also find that the age of the farmland owner is increasing. In 1982, 12 percent of Iowa’s farmland was owned by someone over 74 years of age. By 2007, 28 percent of the farmland was owned by someone over 74 years of age. Expanding the age brackets shows the percentage of Iowa farmland owned by someone over 65 years of age increased from 29 percent in 1982 to 55 percent in 2007 (Duffy and Smith, 2008). Moreover, the percent of land owned by people who did not live in Iowa or only lived there part-time increased from 6 percent in 1982 to 21 percent in 2007. (Duffy and Smith, 2008)
More recent studies in Iowa and elsewhere support the findings that farmland is increasingly being held in the hands of the elderly. (Abdulla,2009; Liu, Fleming, Pagoulatos, and Hu, 2010; Arbuckle et al, 2008; Petrzelka, Bauman, and Ridgely, 2009). The literature also shows the aging land owner is not a new phenomenon. In 1949, Timmons and Barlowe reported that the percent of farmland owners over 65 years of age in the North Central region increased from 12 percent in 1900 to 26 percent in 1946 (Timmons and Barlowe, 1949).
Will this change of ownership increase the amount of land for sale and have a dampening impact on land values? No one knows for sure but the evidence suggests that there will not be a large increase in the amount of land for sale, at least not in the foreseeable future. It appears that the aging landowners will transfer the land primarily to their families and not go through the market. What is not known is what the next generation of owners will do with the land. The indications are that the first inheritors will keep the land but what the subsequent generations will do with the land remains to be seen.