Development of an objective valuation method for agricultural land was the main issue in a Transforum project for ‘De Sjalon’, a large agricultural holding.
Agricultural land is traded or valued every day. Valuation is usually based on economic value in which agro-technical aspects are playing a very minor role. Parties that are buying or exchanging (tenancy/voluntary consolidation) agricultural land are in particular interested in the quality of the land to be acquired. An objective valuation system for the quality of agricultural land does not exist. For De Sjalon this meant that land that was brought in could not be valued by comparing the value of its agricultural yield potential.
The economic value of agricultural land is determined by its agricultural yield potential, local character of the land market, personal characteristics of parties (buyers/sellers), urban influences, and pressure by purchases for nature. The agro-technical aspects determining the agricultural yield potential have been assessed in the project for De Sjalon. These factors have been identified together with the farmers; they are: soil type, drainage/soil structure/seepage, soil-bound fungi and diseases, nematodes, drought-sensitivity and weed pressure. Objective of the Sjalon project was the development of a valuation method for the agricultural yield potential of the fields that were brought into the holding. The number of factors that can not, or insufficiently, be converted into a financial valuation are too large to allow an objective valuation at the short term. This means that parties, such as buyers, tenants and De Sjalon, can at the moment not yet, or insufficiently, determine the agricultural yield potential.
The technical factors are decisive for the cropping plan that can be applied on a field. There is a direct correlation between cropping plan and farming income. The valuation of agricultural land has three bottlenecks. The first bottleneck in the valuation is that not all technical factors can be measured objectively. Sensitivity to soil surface sealing is an example. This property can be determined but it is difficult to convert sensitivity to surface sealing into yield depression. The effect of Altenaria dauci/radicina on winter carrots is another example. The effect of the presence of this fungus on yield and quality of winter carrot is difficult to express in a figure. The fact that a number of technical factors requires considerable agricultural knowledge of farmer or valuer is a second bottleneck. Knowledge about nematodes and –particularly- population control is a well-known bottleneck. The fact that weighing between technical factors depends on the cultivation target is a third bottleneck. The relevant technical factors for a specialised seed potato farm are different from those for an extensive cereal farm. Seed potato production requires the absence of a number of problem organisms that may not occur on the field or parcel, such as potato eelworm and Meloidogyne chitwoodi.
Situations in which a valuation system would be very useful are frequently occurring in practice. The buyer (or tenant) often is the underdog. A livestock farmer often has insufficient knowledge of, e.g., nematodes. This may lead to problems when the farming plan of a livestock farmer who is moving to an arable farming area reckons with letting agricultural land for (seed) potatoes and/or flower bulbs. Soil containing certain nematode species cannot be let for potato or flower bulb cultivation. The presence of nematodes may thus have far-reaching effects on farm returns. The presence of certain nematode species may also lead to the necessity of including permanent grassland in the cropping plan. And permanent grassland may affect the forage maize rotation. It is often difficult or impossible to determine the financial consequences and a large amount of knowledge of buyer or tenant is required.