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P. M. Raup

Bio: P. M. Raup is an academic researcher. The author has contributed to research in topics: Agricultural land & Real estate. The author has an hindex of 1, co-authored 1 publications receiving 24 citations.

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Journal ArticleDOI
TL;DR: Raup et al. as discussed by the authors pointed out that a farmer who is not in the top segment of farm income receivers, and who does not own a substantial acreage of debt-free land, is virtually priced out of the current land market.
Abstract: A most revealing characteristic of an economic system is the value it places on land. The modes by which that value is expressed and the methods of its reckoning are identity criteria of fundamental significance. In a market economy, the linkage between this value structure and the income flows that support it provide a trend indicator that is akin to body temperature in the human anatomy. Using this parallel, we must conclude that the American agricultural economy is feverish. For the forty-eight contiguous states, agricultural land values tripled since 1967, with over 80% of that increase occurring since 1972. The increase has not been uniform among states, with the greatest increases centered in states of the Corn Belt, and in North Dakota, Montana, Pennsylvania, and West Virginia. The smallest increase occurred in California, and increases were below the national average in Arizona, New Mexico, the southern Great Plains and Mississippi Delta states, and all states of the Southeast except Georgia, South Carolina, and Virginia (U.S. Department of Agriculture 1977a, p. 22). In broad terms, cash-grain crop producers have benefited most from recent land value changes, while producers of cotton, fruits and vegetables, other specialty crops, and animal products have lagged behind. Farm expansion buyers have been the dominant force in this recent upsurge of land values, accounting for 63% of all purchases for the year ending 31 March 1977. In Corn Belt counties (for example, in southwestern Minnesota) this figure approaches 80% (Christianson, Nelson, Raup, p. 19). With some exceptions in areas adjacent to large urban centers, these high farm land prices are not the result of an invasion of the farm land market by nonfarm buyers. The principal strength in the current land market is provided by farmer demand for tracts of land to add to their holdings. This is a reflection of the financial capacity created for existing farmers by the windfall gains of land price inflation. If a farm is debt free or burdened with only a small mortgage, an established farmer can spread the cost of additional land over his entire acreage and bid this advantage into a higher price offer for any land that comes onto the market. A recent study of Illinois farms shows that, if the farmgate price of corn is $2 per bushel, it would have required the income-producing capacity of approximately three acres to finance the purchase of one additional acre, at 1976 production costs and land prices (Scott). This provides a rough measure of the extent to which land prices have been inflated by the demand from farm expansion buyers. A farmer who is not in the top segment of farm income receivers, and who does not own a substantial acreage of debt-free land, is virtually priced out of the current land market. The danger in this situation lies in the threat f land market instability. For two years we have experienced the phenomenon of falling farm product prices and rising land values. One interpretation of the current land market is that it exhibits many of the characteristics of a inflationary boom that is nearing its bursting point. To assess this possibility we need data that we do not have on the nature of the total demand structure for farm land. The component of that structure for which we have the most copious data is the demand for the products of land. In a recent discussion, Gardner has suggested that "perhaps the demand curve facing American producers of farm commodities has become much more Philip M. Raup is a professor in the Department of Agricultural and Applied Economics, University of Minnesota. Paper 1694 of the Miscellaneous Journal Series, Agricultural Experiment Station, University of Minnesota. This paper is an expansion of testimony presented at a Hearing on "Obstacles to Strengthening the Family Farm System: Competition for Land," conducted by the Subcommittee on Family Farms, Rural Development and Special Studies, Committee on Agriculture, U.S. House of Representatives, at Marshall, Minnesota, on 15 October 1977.

37 citations

Book
04 Dec 1989
TL;DR: Friedberger's "Shake-out: Iowa Farm Families in the 1980s" as discussed by the authors depicts the farm crisis in all its complexity, providing a useful corrective to popular accounts.
Abstract: The farm crisis of the 1980s quickly became a media event, with scenes depicted starkly in black and white on color TV. The embattled farmers, accompanied by their advocates, stood holding off bankers and sheriffs wielding foreclosure notices. In this new book, using findings from interviews and participant observation, agricultural historian Mark Friedberger peels away the emotion and rhetoric of the "save the family farm" movement to provide a realistic picture of what happened in on important farm state. "Shake-out: Iowa Farm Families in the 1980s" depicts the farm crisis of the 1980s in all its complexity, providing a useful corrective to popular accounts. Friedberger's approach and his focus on individuals present the problem in America's heartland at a truly grass roots level. Those seeking a better understanding of American agriculture in the 1980s and of rural life generally will find it invaluable.

24 citations

Journal ArticleDOI
TL;DR: In this paper, the authors present an analysis of factors influenc- markets, but no universally accepted method or sysing farm real eatate prices in the southeastern United States has emerged.
Abstract: This article presents an analysis of factors influenc- markets, but no universally accepted method or sysing farm real eatate prices in the southeastern United ter has emerged. 2 Population density and topographic States. The first step in the analysis is the use of a mul- and climatic factors are commonly used to provide tivariate criterion to segment the regional market into some homogeneity of agronomic conditions (Harrell homogeneous land resource components. Segmenta- and Hoover; Spurlock and Adrian; Herr; Vallink). tion of the regional market reflects the view long held Schuh and Scharlach used regression residuals to clasby land economists that the aggregate farm real estate sify counties in Indiana into 4 submarket areas. Corty market really comprises a conglomerate of smaller, used population density to group the 48 contiguous differentiated submarkets (Barlowe; Crowley; Sco- states into 11 markets. Clifton used a multivariate crifield). These economists use regression analysis to ex- terion to classify U.S. counties into a set of homogeamine the importance of various factors on land prices neous farm real estate submarkets. The latter study within each homogeneous market identified in the in- employed county data from the 1969 Census of Agriitial phase of the research. It is hypothesized that the culture and the 1970 Census of Population to analyze magnitude of and relationships between determinants factors affecting land values within each submarket. of land prices are uniform across market areas subject to different levels of urban influence. Identification of the magnitude of these factors influencing land prices CONCEPTUAL FRAMEWORK in homogeneous areas and the relationships between them may provide an improved understanding of the Though we speak of the land market in a spatial sense functioning of the farm real estate market. (states and regions), the market as a unit of inquiry is Previous studies have statistically explored the im- not easily delineated. Land viewed either as a producportance of various factors in determining land values tive or consumptive good does not conform to the (Castle and Hoch; Herdt and Cochrane; Klinefelter; Marshallian definition of an economic good. Parcels Maier, Hedrick and Gibson; Reynolds and Timmons; of land are heterogeneous and fixed in location with Tweeten and Martin). These include net farm income, relatively few buyers and sellers in local areas. Each government transfer payments, farm enlargement, parcel of land constitutes its own unique market. population density, capital gains, expectations, and Therefore, the conceptual focus of this analysis is more technological change. However, most previous empir- properly directed toward "market area classification" ical studies and existing theoretical analyses have dealt than "market classification" per se. primarily with macrodata or aggregate market analy- Assuming the local economic supply of farmland to sis. be perfectly inelastic, market areas can be defined on Structural variables in an aggregate market context the basis of demand relationships. Areas which exhibit may undergo periodic change and specific coefficients similar demand characteristic effects on land should may vary in magnitude and direction among submar- experience similar land values, given the absence of kets. Earlier studies conducted by Christensen and Raup supply effects. For example, farmland adjacent to urin Minnesota and Johnston in California provide sup- ban areas, which often provides needed space for urport for this hypothesis. Regional analysis of land prices ban and industrial activities, should be expected to must therefore identify relatively homogeneous land experience high land prices relative to similar land sitmarket areas while at the same time ensuring that the uated in a predominately rural area. In the urban area, size of the submarket areas are large enough for reli- nonagricultural demands such as accessibility, timing able statistical analysis. of development, and intensity of use combine with farm Several classification systems have been proposed factors to influence the earning expectations of land to identify conglomerates of smaller homogeneous owners. Generally, in the rural area expected net ag

17 citations

Journal ArticleDOI
TL;DR: In this paper, a stochastic continuous-state dynamic programming problem is formulated for a multi-period investment portfolio model that includes risky farmland, risky and risk-free non-farm assets, and debt financing on farmland in the presence of transaction costs and credit constraints.
Abstract: This paper develops a multiperiod investment portfolio model that includes risky farmland, risky and risk-free nonfarm assets, and debt financing on farmland in the presence of transaction costs and credit constraints. The model is formulated as a stochastic continuous-state dynamic programming problem, and is solved numerically for Southwestern Minnesota, USA. Results show that optimal investment decisions are dynamic and take into account the future decisions due to uncertainty, partial irreversibility, and the option to wait. The optimal policy includes ranges of inaction, states where the optimal policy in the current year is to wait. The risk-averse farmer makes a lower investment in risky farmland reflecting risk-avoiding behavior. We find that, in addition to risk aversion, the length of the planning horizon affects risk-avoiding behavior in investment decisions. In contrast to a static model, changes in the riskiness of returns affect optimal investment decisions even when the decision maker is risk neutral. Finally, we find that higher debt financing on farmland is optimal when risky nonfarm assets can be included in the optimal investment portfolio and that the probability of exiting farming increases with the risky nonfarm investment. Dans le present article, nous avons elabore un modele de portefeuille multiperiode compose d'actifs agricoles risques (terres), d'actifs non agricoles risques et sans risque ainsi que de financement par emprunt de terres comprenant des couts de transaction et des contraintes de credit. Le modele a ete formule comme un probleme de programmation dynamique stochastique en temps continu et a ete resolu de facon numerique pour le sud-ouest du Minnesota, aux Etats-Unis. Les resultats ont montre que les decisions optimales d'investissement sont dynamiques et qu’elles tiennent compte des decisions futures en raison de l'incertitude, de l'irreversibilite partielle et du choix d'attendre. La politique optimale inclut des plages d'inaction et des situations ou la politique optimale de l'annee en cours doit attendre. L'agriculteur risquophobe investit peu dans des actifs fonciers risques ce qui traduit un comportement d'evitement des risques. Nous sommes arrives a la conclusion que la longueur de l'horizon de planification, en plus de l'aversion pour le risque, influe sur le comportement d'evitement des risques au moment de prendre des decisions d'investissement. Contrairement au modele statique, les changements dans les risques de rendements influent sur les decisions optimales d'investissement meme si le decideur est indifferent au risque. Finalement, nous avons trouve que le financement par emprunt pour des terres agricoles est optimal lorsqu’il est possible d'inclure des actifs non agricoles risques dans le portefeuille optimal et que la probabilite de quitter l'agriculture augmente en presence d'investissements non agricoles risques.

10 citations