THE CAPITALIZATION OF WHEAT SUBSIDIES INTO AGRICULTURAL LAND VALUES

Agricultural policy is an important determinant of agricultural incomes in developed countries. In this light. policy change is expected to have a significant effect on agricultural incomes and thus on agricultural asset values. This analysis addresses the role of policy in determining agricultural land values in six important wheat-producing regions: the states of Kansas and North Dakota in the United States; the provinces of Manitoba and Saskatchewan in Canada; and the regions of Centre and Picardie in France. The results indicate a strong relationship between support through agricultural policies, as measured by producer subsidy equivalents, and land values. Dynamic simulations of alternative policy scenarios suggest that policy reform to reduce subsidies of current policies will reduce land values in the EC and bring about modest increases in the U.S. and Canada.