U.S. farmland rent-to-value ratios have generally declined over time

U.S. farmland rent-to-value ratios have generally declined over time

The farmland rent-to-value (RTV) ratio, calculated as the cash rent per acre divided by the land value per acre, is a proxy for how quickly an asset will pay for itself. The roughly 45-year trend reveals a decreasing RTV ratio. If agricultural rents were the sole source of returns from farmland, the farmland would have paid for itself in about 14 years in 1967, but would take more than 34 years in 2011. However, in many places, nonagricultural returns can be earned from the land, such as returns from developing the land. Decreasing RTV ratios are consistent with the growing importance of nonagricultural factors in determining land values. This chart is found in Trends in U.S. Farmland Values and Ownership, EIB-92, February 2012.


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