The role of CAFO regulations, production scale and externalities in farmland markets: evidence from New York state

What the paper says

Purpose The varied pressures on farm asset values highlight key tradeoffs in financing resilient food systems. Rising asset values may bolster the resilience of current landowners but can also reduce flexibility and raise barriers to entry. In the US, environmental regulations on livestock operations may increase competition for land, thereby driving up farmland values. Additionally, economies of scale and externalities associated with livestock production may further shape land markets. Design/methodology/approach In this study, we estimate how environmental regulations, farm scale and negative externalities associated with livestock production are related to farmland values in New York state. The analysis covers the 2007–2013 period and draws on a detailed dataset that includes all farmland sales, locations of concentrated animal feeding operations (CAFOs) and prevailing wind direction. We estimate a hedonic model of farmland transaction prices that controls for key agricultural and nonagricultural determinants of land value. Findings Our results suggest that land values near larger, more heavily regulated dairy farms are substantially higher, a pattern not fully accounted for by economies of scale. However, these effects are more pronounced for parcels not located downwind of dairy farms, indicating that externalities from livestock production also influence farmland markets. Originality/value This study highlights the importance of incorporating livestock production scale, environmental regulation and externalities into analyses of farmland markets. Asset value impacts are an important consideration for initiatives aimed at increasing the resilience of food systems.