How Will the 1996 Farm Bill Affect the Outlook for District Farmland Values?

Farmland values in the states of the Tenth Federal Reserve District rose about 5.5 percent over the year ended June 30, 1997 (McDaniel and Lamb). Indeed, over the past two years prices in many parts of the country have risen sharply. The jump in farmland values comes at a time of dynamic change in the farm sector. Last year, the federal government enacted sweeping farm legislation that both lowers payments to producers and removes many government controls on farm production. Government payments have been an important source of farm income for many years, and have likely been capitalized into farmland values. Changes in federal subsidies could have important implications for values. Since farmland is threefourths of the asset base of the farm sector, the impact of changes in policy on farmland values is crucial to the financial health of the sector.