Capitalization of benefits of the flue-cured tobacco price support program into farm land values

Research has shown that acreage restrictions in flue-cured tobacco production have resulted in the capitalization of a portion of the future benefits of the price-support program into land values. Higher net income for farmers, the primary objective of the program, is therefore defeated through higher land cost and increased rents. The objective of this study was to derive empirical estimates of the capitalized value of an acre of tobacco during 1958-1961 in Pittsylvania County. The estimates were compared with those obtained in a previous study for the years 1954-1957. In addition, some analysis was made of factors which influence the price of farmland but which were difficult, if not impossible, to quantify as continuous variables for statistical measurement.

Data on sale value of farms and factors thought to influence sale value were secured from public records. These data were analyzed by a multiple linear regression statistical technique to measure the value of an acre of tobacco allotment as a right to produce tobacco. Partial regression coefficients indicated that an acre of allotment was worth $833, $1,216, $1,453, and $1,460 for the four years, 1958-1961, respectively and $1,345 for the four years combined.

Questionnaire data secured from buyers indicated that there were several distinct types of buyers on the land market and that the type of buyer influenced the type of farm purchased. Further, some differences in type of sale, number of buyers competing for a farm, variation in reason for purchase, and buyers' knowledge of market affected the sale price of tobacco farms.