Valuation of soil productivity in farmland prices

Purpose This study examines how commodity prices mediate the relationship between soil productivity and farmland values to better understand the dynamic economic value of soil quality. Design/methodology/approach The authors use a hedonic pricing model to analyze land values derived from about 88,000 Illinois farmland sales transactions from 2000 to 2022, interacting soil productivity measures with spatially-interpolated commodity prices to separate the effects of market conditions from the marginal productivity of soil. Findings Premiums for farmland with high soil productivity ratings vary significantly with commodity prices. The marginal product of increased soil productivity was twice as large from 2018 to 2022 as in the 2000–2005 base period. Originality/value This research introduces a novel approach to assess soil quality premiums by interacting soil quality measures with expected output prices, allowing the data to reveal distinct technology-driven changes in soil value capitalization.