Market Power in Agricultural Land Markets: Concepts and Empirical Challenges

This paper provides review about challenges and opportunities to assess and quantify market power in agricultural land markets. Measuring land market power is challenging because the characteristics of this production factor hinder the direct application of familiar concepts from commodity markets. Immobility, fixed availability, and large heterogeneity of land and potential users contradict assumptions of fictitious point market for homogeneous goods. Moreover, the use of concentration indicators for policy assessments is hampered by two problems. First, defining the relevant regional size of the market is challenging and concentration indicators are not robust with regard to market size and number of actors. Second, high concentration of land ownership or land operation may point at potential market power, but it may also be the result of an efficient allocation of land due to structural change in agriculture. The aforementioned challenges are illustrated with a case study for the Federal State of Brandenburg in Germany. Using available data for land sales, a regression analysis reveals a negative relationship between land use concentration and farmland prices. This result can be interpreted as an indication of market power on the buyer side in agricultural land markets. However, it is hardly possible to translate this finding into recommendations for land market regulations because the evaluation of the potential misuse of dominant positions in land markets requires a case-specific analysis. Providing evidence for the exertion of market power in land markets is extremely complex and deserves further attention from researchers and politicians.

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Ekonomiczne i prawne aspekty obrotu ziemią w Polsce na tle rynku europejskiego

Ekonomia ◽

10.19195/2084-4093.23.3.10 ◽

2018 ◽

Vol 23 (3) ◽

pp. 135-158

Author(s):

Sergiusz Prokurat

Keyword(s):

Agricultural Land ◽

Economic Transition ◽

State Intervention ◽

Land Ownership ◽

Legal Aspects ◽

Land Market ◽

Land Markets ◽

Market Regulation ◽

The Third ◽

History Of

Economic and legal aspects of land turnover in Poland compared to the European marketThis paper discusses the regulation of agricultural land market in Poland compared to the European market in view of the increasing prices of land in Europe. It presents the causes of the increasing prices of land in Europe, including Poland, and certain historical considerations which affect the current relevancy of land in Poland and the reluctance to sell it to foreigners. The author believes that the history of agricultural land market regulation in Poland after 1989 can be divided into three periods. The first period starts with the beginnings of the economic transition and liberal, unhampered land turnover. The second dates back to 2003, when new regulations introduced certain restrictions in land turnover and land ownership. The third period is dated from the entry into force the Law of 14 April 2016, which is characterised by strict state intervention on the agricultural land market. It follows the trend of retreating from liberalization, which has recently been more intensified in Central and Eastern Europe. The article lists economic and legal factors, which restrict the functioning of agricultural land markets in Poland, and compares these regulations to selected other European countries.

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Measuring liquidity in agricultural land markets

Agricultural Finance Review ◽

10.1108/afr-03-2021-0037 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Marlene Kionka ◽

Martin Odening ◽

Jana Plogmann ◽

Matthias Ritter

Keyword(s):

Empirical Analysis ◽

Agricultural Land ◽

Arable Land ◽

Market Liquidity ◽

Land Market ◽

Spatial And Temporal Variability ◽

Land Markets ◽

Content Type ◽

Land Prices ◽

Panel Vector Autoregression

PurposeLiquidity is an important aspect of market efficiency. The purpose of this paper is threefold: first, this paper aims to discuss indicators that provide information about liquidity in agricultural land markets. Second, this paper aims to reflect on determinants of market liquidity and analyze the relationship with land prices. Third, this paper aims to conduct an empirical analysis for Germany that illustrates these concepts and allows hypothesis testing.Design/methodology/approachThis study reviews liquidity dimensions and measurement in financial markets and derives indicators applicable to farmland markets. In an empirical analysis, this study exhibits the spatial and temporal variability of land market liquidity in Lower Saxony, a German federal state with the highest agricultural production value. This study uses a rich dataset that includes 72,547 sale transactions of arable land between 1990 and 2018. The research focuses on volume-based (number of transactions, volume and turnover) and time-based (trading frequency and durations) measures. A panel vector autoregression and Granger causality tests are applied to investigate the relation between land turnover and land prices.FindingsThe paper confirms the thinness of farmland markets but also reveals regional and temporal heterogeneity of land market liquidity. This study finds that the relation between market liquidity and prices is ambiguous. This study concludes that a high demand from expanding farms absorbs supply shocks regardless of the current price level in agricultural land markets.Originality/valueEven though the relevance of agricultural land markets’ thinness is widely acknowledged in the literature, this paper is one of the first attempts to measure liquidity in agricultural land markets and to explain its relationship with land prices.

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What Moves the German Land Market? A Decomposition of the Land Rent-Price Ratio

German Journal of Agricultural Economics ◽

10.30430/69.2020.1.1-18 ◽

2020 ◽

pp. 1-18

Author(s):

Jana Plogmann ◽

Oliver Mußhoff ◽

Martin Odening ◽

Matthias Ritter

Keyword(s):

Interest Rates ◽

Agricultural Land ◽

Price Volatility ◽

Land Market ◽

Price Ratio ◽

Land Markets ◽

Land Rent ◽

Federal States ◽

Price Increases ◽

Western Germany

The price increases on agricultural land markets over the last decade have triggered a debate about land as an attractive investment opportunity for agricultural and non-agricultural investors. In a static environment, the rent-price ratio provides a first indicator of the profitability of an investment in land. In this paper, we apply the dynamic Gordon growth model to Western Germany and decompose the rent-price ratio into the expected present values of rental growth rates, real interest rates, and a land premium, i.e., the excess return on investment. This analysis reveals that the recent price surge on agricultural land markets was not unprecedented; that the land market rent-price ratio is rather low and varies considerably among federal states; and that (expected) premia for land are mostly negative. Finally, we find that changing expected present values of returns on land investments are the major driver for land price volatility.

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Some aspects of land market in Central and Eastern European countries: focus on Slovakia

Agricultural Economics (Zemědělská ekonomika) ◽

10.17221/5116-agricecon ◽

2012 ◽

Vol 51 (No. 8) ◽

pp. 335-341

Author(s):

P. Bielik ◽

E. Horská ◽

N. Turčeková

Keyword(s):

Economic Analysis ◽

Eastern Europe ◽

Central And Eastern Europe ◽

Agricultural Land ◽

Agricultural Products ◽

Land Market ◽

Land Markets ◽

Eastern European ◽

Natural Conditions ◽

Eastern European Countries

The presented research was done in two different regions in Slovakia, characterized by different soil and natural conditions and also production and economic results. The micro-economic analysis was aiming not only at private farmers but also at other legal entities using land for production of agricultural products. The first monitored group consisted of 412 private farmers, farming in average 43.2 ha of agricultural land. The second group consisted of 150 businesses, having 1 866 ha of agricultural land in average. The paper also shows different problems of restructuring land markets in some countries of Central and Eastern Europe.

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FINANCIALIZATION AND SPECULATION IN AGRICULTURE – POSITIVE AND NEGATIVE ASPECTS OF THE FINANCIALIZATION OF THE ECONOMY

Annals of the Polish Association of Agricultural and Agribusiness Economists ◽

10.5604/01.3001.0013.3064 ◽

2019 ◽

Vol XXI (3) ◽

pp. 73-81 ◽

Cited By ~ 1

Author(s):

Justyna Franc-Dąbrowska

Keyword(s):

Financial Crisis ◽

Institutional Investors ◽

Agricultural Land ◽

Raw Materials ◽

Agricultural Products ◽

Land Market ◽

Land Markets ◽

Financial Instruments ◽

Dual Nature ◽

Real Value

The aim of this study was to present the phenomenon of financialization, with consideration for its dual nature: the negatively-perceived side, which is said to have contributed to the financial crisis of 2007-2008, and the positive, which influences the production of real value, especially in the agricultural land market. It was found that the value of agricultural land is increasing, along with the average annual prices of agricultural products paid for by economic entities purchasing directly from producers. The financialization of the economy after 2007 is not only associated with increases in value brought about by investments in new financial instruments, but with the process of investors transferring agricultural raw materials to commodity and agricultural land markets. The study found that both institutional investors and farmers invest in agricultural land, with a view to benefiting from the advantages of future increases in their value. There are, however, limitations on the potential purchase of agricultural land by institutional investors, which, as a result, create a price barrier on the purchase of land by actual farmers.

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FAO experiences with land market development and land management instruments in Eastern Europe and Central Asia

Agrár- és Környezetjog ◽

10.21029/jael.2020.29.85 ◽

2020 ◽

Vol 15 (29) ◽

pp. 85-103

Author(s):

Morten Hartvigsen ◽

Maxim Gorgan

Keyword(s):

Eastern Europe ◽

Central Asia ◽

Land Management ◽

Technical Assistance ◽

Agricultural Land ◽

Land Consolidation ◽

Market Development ◽

Land Market ◽

Land Markets ◽

Land Banking

Most countries in Eastern Europe and Central Asia have farm structures characterized by excessive land fragmentation and small average farm sizes. Well-functioning agricultural land markets are a precondition for agricultural and rural development in general. However, agricultural land markets remain weak and still face many constraints in the region. Land management instruments such as land consolidation and land banking in addition to facilitating agricultural development also contribute to land market development. The Food and Agriculture Organization (FAO) of the United Nations is providing technical assistance to the member countries in Eastern Europe and Central Asia related to development of agricultural land markets and introduction of land management instruments such as land consolidation and land banking.

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Oil Prices: Limits to Growth and the Depth of Falling

Voprosy Ekonomiki ◽

10.32609/0042-8736-2006-3-28-41 ◽

2006 ◽

pp. 28-41 ◽

Cited By ~ 6

Author(s):

I. Bashmakov

Keyword(s):

Energy Demand ◽

Negative Relationship ◽

Oil Prices ◽

Production Factor ◽

Energy Costs ◽

Purchasing Power ◽

Limits To Growth ◽

Technological Basis ◽

Production Factors ◽

Output Ratio

This article deals with the determination of future oil prices. The approach used is based on the evaluation of purchasing power limits and allows to put the limits to monopolistic price setting. Several important findings are formulated: going beyond the upper thresholds of purchasing power stipulates negative relationship between energy costs and GDP growth rates, and this brings the dynamics to energy demand to price elasticity. This approach is also based on what the author calls the economics of constants and variables, i.e. on the existence of very stable macroeconomic proportions, which may be observed throughout the whole period of statistical observations (over 200 years). It provides grounds for two conclusions. First, the upper limit of energy costs to the gross output ratio is determined by the least acceptable profitability. Second, the theoretical postulate on substantial production factors substitution used in the production functions theory may be incorrect. In reality, the change of the economy technological basis leads to the substitution of low quality production factor by the same factor with a higher quality. Application of this approach brings the basis for predicting oil prices for 2006-2008.

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