What happened to farmland values during the years 1981 to 1987 when there was a significant decline in value? What is the probability that such a decline could occur again?
This period of time reflects the “Bad Years” for farmland prices across the United States. Since World War II there have only been four years when average farmland prices in the United States declined in value—1983, 1985, 1986 and 1987. To understand what led to the decline of the 1980’s, we first need to review the build-up to this period during the 1970’s. Agriculture during the 1970’s was characterized by a move to greater efficiencies. Technological advances in equipment produced larger tractors and harvesters that permitted a single farmer to dramatically increase the amount of acres that could be farmed in the same amount of time. This equipment was expensive and was purchased on credit. In order to recoup this capital investment in equipment, farmers had to increase their tillable acres and they choose to increase their debt loads further by purchasing land on credit as opposed to leasing it. These land purchases caused a generational consolidation of small family farm plots int
