4 Key Factors to Consider When Valuing Farmland
As with everything in the world of prospect research, valuing a farm is more of an art than a science. By using a few key data points, however, you can provide your development officers with a strong estimate of their prospects’ farm values.
There are four main factors that you need to consider, which I’ll elaborate on below: the acreage, the market value of farmland in that state, whether the owner is receiving farm subsidies for that property, and whether the farm is a working farm.
For properties listed as agricultural, you’ll need to locate the acreage on the assessor’s property record for the property. This information is usually included in the breakdown of the property components.
2. Market Value
In 2014, the USDA published a document showing the average market price for farmland in each state. Once you have located the acreage for the property you are valuing, you can multiply the acreage by the value of farmland in that state, which will provide you with the market value of that particular parcel.
An important aspect of farmland that many researchers overlook is farm subsidies. Each year, the federal government provides eligible farmers with subsidies to offset unexpected costs due to drought or other natural disasters. In addition, some farmers participate in conservation programs that leave their fields fallow or as wildlife habitats. These farmers also receive subsidies for these parcels of land.
Via a website run by Environmental Working Group (EWG), you can search by prospect or business name either within a particular state or nation-wide. If your prospect is in the database, you can discover how much that prospect receives from the government each year for his properties as well as for what programs he is receiving money and where the properties are located. The only downfall of this database is that the subsidy amounts have not been updated for a few years. As such, I’ve found that a best practice is to average the last five years of data provided in order to determine what the average estimated annual subsidy may be for that particular prospect.
4. Working Farm
If the above subsidy website indicates that the prospect is receiving subsidies for crops, then you can assume that the property is probably part of a working farm. In that case, you’ll want to search the secretary of state website for the state in which that property is located in order to determine whether the property belongs to an incorporated farm. If unable to locate this information via the secretary of state, you can sometimes find this information, along with company sales, via Manta, LexisNexis, or similar databases.
If you are unable to locate the incorporated farm via any of the above means, you can locate the estimated sales of the farm by using the type of crop, the bushel yield per acre for that particular crop, and the acreage of the property and multiplying it by the current value of that particular crop. This number is the estimated market sales for the crop of that particular farm.
Types of Prospects
In my research, I’ve found that there are usually two types of prospects who have farmland: one, prospects who farm the land for a living, and two, prospects who hold land that is either an investment or has been passed down by family.
Typically, prospects who hold land and are employed outside the farm are stronger major gift candidates than those prospects who own and run a small family farm. If your research indicates that a prospect owns farmland as an investment property, then I would not hesitate to investigate whether he also owns other properties, such as airplanes, boats, or second (or third) homes.
Please feel free to contact me or comment below if you have questions or thoughts on other ways to value farmland! If you found this helpful, make sure to check out my free guides on researching doctors and nurses.
Emily Davis began as a research associate at the Indiana University Foundation and was promoted to development analyst in 2011. In addition to assisting her science- and health-related clients with research, she has completed research for the IU and IU Foundation presidents as well as on international prospects. She received her undergraduate degrees from Ball State University and her master’s degree from Indiana University Bloomington. In her free time, she enjoys completing freelance editing and formatting work when not watching Thomas the Train with her toddler.