No matter what methods you use to determine the value of agricultural land, the goal is to establish a sound financial base for land use decisions. In 2000, land accounted for 79 percent of a farm's total business assets. It usually is the collateral farmers use for operating loans, so accurate valuation is important.

First steps

Decide how the land will be used. Land may be valued or taxed differently depending on its use. Is it for growing annual cash crops or for crops like trees that take a long time before harvest? Will the land be used for collateral or sold for development?

Get an appraisal. "One hundred percent of the agricultural land value data we use for making loans is obtained through independent, certified appraisers," says Dockey Brasher III, vice president and senior loan officer of Citizens Bank, Crawford County, AR.

Estimate the value of land already in agricultural production. One method is given under the Calculating Value section of this article.

Research the market value of land yourself by gathering comparable sales data in your local area.

Calculating value

The Alabama Cooperative Extension Service has developed an effective method to calculate the value of land where the income is derived from growing crops.

Land value ($/acre) =annual net crop income ($/acre)/alternative annual % interest rate.

Get the annual crop income by taking the total crop revenue minus the total production cost (including family labor and taxes). The alternative annual interest rate means what your return might be from investments like CDs, stocks and bonds. Factor in the inflation rate from the present until a change is planned.

Look at several past years of production to get an average profit per acre.

Information sources

Most states have the tax assessor's real estate property records online. Select a county and enter the name of the property owner or select a specific parcel of land by tract number. It will tell you acreage, market value, taxes, land use, improvements, etc.

Several online data banks provide property value and sales records. One is free; another is fee-based.

Seek advice from property experts such as realtors, banks and companies that contract with local farmers for production.