Farmland plays a critical role in the financial health of the agricultural sector. As a result, a number of institutions closely monitor farm real estate markets and publicly report estimated farmland values. This study aims to compare the information content of reported farmland values from three institutions.
A state space model is formulated to link observed price estimates to the unobservable value of farmland. The model considers reported values over the period 1965‐2010 for Iowa from three surveys: Iowa State Extension Service, the Federal Reserve, and the USDA.
The values reported by Iowa State receive the greatest weight in estimating the unobservable market value, yet the appreciation rates implied by the USDA estimates most closely track those of the unobservable value.
This study is the first to estimate the unobservable value of farm real estate based on observed estimates. The empirical procedure offers a number of unique advantages. It combines information from data reported at both annual and quarterly intervals and addresses potential problems related to cointegration, nonstationarity, and nonlinearity.
