Soil Health and Land Value
Over the last several years, s significant portion of U.S. cropland has been farmed using conservation practices such as no- or minimu-tillage and cover crops that are known to improve soil health. Since some or all of the land that is being farmed with known conservation practices will be sold in the near or distant future, it makes sense that this cropland should be valued more than cropland that has been farmed using “conventional” practices.
In a report titled “Land Value & Soil Health in Cropland Appraisals” from the Delta Institute, points to consider when appraising farmland that has been cropped using conservation practices are presented.
• Appraisals that place a value on farmland are becoming a potential driver for the increased adoption of production practices that are known to improve soil health.
• Rural appraisers need to be prepared to place a value on soil health when placing a value on farmland that is for sale or lease.
• Current productivity indices used in farmland appraisals do not reflect productivity changes in response to land management that focuses on soil health. Thus, adjusting productivity indices based on soil health parameters will provide a method to directly affect the valuation of a property based on its soil health that will have improved following use of conservation production practices on the site.
• Updating indices to include soil health benefits requires up-to-date and statistically valid data that can be accurately used when appraising the value of farmland.
• Currently, the applicability of soil health benefits to the valuation of farmland can be fluid and require an appraiser to make a judgement that is not based on direct evidence. Also, most soil health benefits that result from the adoption of conservation production systems are spread out over several years, and this may go unaccounted for in the appraisal process.
• Current aspects of appraising the value of farmland that is being sold generally describe soil properties such as texture, and use soil surveys to document site conditions that will contribute to the farm’s potential for growing a crop. Thus, they do not reflect productivity changes that may have occurred in response to adoption of management practices that focus on soil health.
• The Appraisal Institute provides numerous documents that provide information for appraisers to use in accurately identifying the value of features such as solar panels that may have been installed on a for-sale property. Information in these documents may provide a framework that can be used in the valuation of a site that is based on in-place soil health practices.
• As the adoption of practices that improve soil health grows, there is a concurrent need for better appraisal guidelines that 1) place an increased value on healthier soils, and 2) encourage the adoption of practices that improve soil health by placing a greater value on them.
• In an article titled “Can no-till raise land values?”, author Chris Torres cites the launching of the Delta Institute project with the objective of testing a method for land appraisers to assign an accurate value to farmland that has been farmed using various soil health practices. Hopefully, results from this study can be used to 1) replace sales of comparable farmland with an accounting for soil health as a factor when assigning value to farmland, and 2) create a financial incentive for a farmer to invest in practices that will improve soil health.
Composed by Larry G. Heatherly, June 2024, larryh91746@gmail.com