It’s well-documented that soil health practices such as no-till and cover crops can benefit the environment and farmers’ pockets. But can it make farmland more valuable at sale time?

It’s a question several different institutions are grappling with, including one Midwestern nonprofit and Cornell University.

The Delta Institute has launched a pilot project to test a method for land appraisers to assign an accurate value to farmland that has various soil health practices installed. Meanwhile, Cornell University is conducting complementary work that examines economic and policy incentives that would encourage farmers to steward long-term soil health.

William Schleizer, CEO of the Delta Institute, says current land appraisals only reference soil type to estimate income from land to determine value.

For the most part, sales comps are used to determine the value of a property, even farmland, Schleizer says.

“It is a fairly easy and straightforward approach, and allows an appraiser to adjust a value based on soil properties — sand, silt and clay content — location and market trends,” he says. “The problem is that it does not account for soil health as a differentiator when assigning value to plot of land. 

“In some places, it creates little financial incentive for a farmer to invest resources in practices that increase soil health,” he adds.

Accounting for soil health

The institute has launched a pilot program in two states — Illinois and Michigan — testing out an alternative way for appraisers to account for soil health practices in setting land values.

Schleizer says the goal is to optimize a system for appraisers that can be useful, accessible and fair.

Lucas Chamberlain, senior associate of programs at Delta Institute, says there are challenges to overcome. For example, while testing for soil health fertility and plant-available nutrients is widely available and affordable, testing for soil health indicators is less so, and it is a bottleneck that has been identified.

The bigger challenge, though, is that farmland prices — especially in Illinois — are still rising.

“We were expecting them to at least stagnate, but even in the present quarter right now from January to March of 2024, they've increased still, despite tightening agricultural credit conditions and decreased farm incomes — or at least projected decreased farm incomes,” Chamberlain says. “So, we are seeing that the agricultural real estate market in Illinois is still very, very strong, and that there might be less incentive for producers to adopt conservation practices.

“It’s kind of like putting the cart before the horse because right now, the incentive is still, if I can get the premium on my land just as a result of the productivity index that’s institutionalized in this process, that might be a barrier as well,” he adds.

Overcoming ‘cultural stasis’

The institute has worked on this issue for several years and recently put together a report, “Land Value and Soil Health and Cropland Appraisals,” that delves deeper into it.

Schleizer says appraisers are, for the most part, responding to demand from folks who are doing the real estate transactions, and the current system of comps is the easiest way to move a real estate transaction forward and quickly.

“And what we found is this kind of cultural stasis,” he says. “Just because of the kind of cultural norms of what is in place now, is kind of the standard. But there are opportunities to move that if you can align it with the folks that are doing these transactions to ask the appraisers to do it for them. So, we've been focusing on kind of thinking about those strategies to have this become more of a standardized process to incorporate soil health and what those mechanisms might look like.”

Why it matters

In its report, the institute claims there are no market drivers to really retain the premium of farmland under soil health-focused management.

Appraisers may even have difficulty adjusting for land that may lose its value immediately upon sale. So, for example, if a no-tilled field was then suddenly tilled, how is that accounted for?

Schleizer says the key is putting a mechanism in place to account for that when the next appraisal happens.

“So there it really is about the intentionality of when the appraisal should be used, and when it shouldn't be used for the land valuation process,” he says.

At Cornell, researchers are looking at how soil health affects farmland prices, as well as how farmland owners can better advertise their land’s soil health upon sale and possible policy solutions.

To understand buyers’ and renters’ attitudes on soil health upon buying or renting farmland, the university is running a survey of prospective land buyers and renters.

For those interested in participating in the soil health and farmland survey, use the following link: cornell.ca1.qualtrics.com.