Recent trends in the price of Oregon’s timberland

Posted on May 15, 2025 by Dan Bigelow

A large proportion of Oregon’s land is forested. Based on a 2024 Oregon Department of Forestry estimate, forestland covers 10.4-11.3 million acres (about 39%) of the state’s non-federal land. Oregon’s forest products sector is nationally significant, as we consistently lead the United States in softwood and plywood production. In 2021, the forestry sector accounted for about 3% of all jobs in the state, employing roughly 62,000 people.

This post gives an overview of recent trends in the market for western Oregon’s privately-owned timberland. I specify “privately-owned” because an important piece of the forestry sector’s modern history concerns the role of timber harvests on federal land. Until the late 1980s, private and federal forestland (mostly National Forests managed by the US Forest Service (USFS)) each supplied 40-60% of the timber harvested in Oregon. Between 1989 and 1995, following the listing of the northern spotted owl under the Endangered Species Act and other policy changes, timber harvests on federal lands fell by roughly 90%. Although total harvests remain about 50% lower than they were in the 1970s and 1980s, private lands have supplied about 75-80% of harvested volume in recent decades.

The timberland price data I’m using cover 3,789 transactions in western Oregon over the period 1999-2024. (See the end of the post for details on how I constructed the sample.) To define western Oregon, I use the US Forest Service’s Resource Area regions and focus on land in the Northwest and Southwest regions, which includes all counties west of the crest of the Cascades. The northern boundary of Lane County divides the Northwest and Southwest regions. Western Oregon is responsible for the vast majority of logging and standing timber volume in the state. Eastern Oregon, containing the USFS-defined Central and Blue Mountain regions, is omitted because its forestry sector is particularly dependent on federal timber harvests. As a result, its private timberland market is relatively inactive, with only 378 sales occurring since 1999.

Figure 1 plots the acreage-weighted average price of timberland in western Oregon between 2000 and 2024, with the centered 3-year average (which includes 1999 prices in the value for 2000) shown in gray to smooth out some of the year-to-year movement. The average price of timberland increased by about 50% from 2000 to 2007 but gave back most of the gain over the next five years during the Great Recession and its aftermath, with the market bottoming out in 2012. The reason is straightforward. US timberland is a primary source of the raw timber used in domestic residential construction. When the housing market crashed, so did the demand for lumber and the land from which it is sourced. Everything else being equal, this demand contraction reduced timberland prices. Note that this contrasts with what happened to agricultural land markets during the 2007-2009 recession, when farmland prices remained fairly stable.

Figure 1. Timberland price per acre (weighted by sale acres), western Oregon, 2000-2024

Between 2012 and 2017, timberland prices regained all of the lost value, increasing to around $12-13,000 per acre, and holding at around that level today. Over the past couple years, Oregon’s private timberland market has become more erratic. To understand why, consider what’s occurred with lumber prices, or the price of processed timber used in things like housing construction. Lumber prices in the Pacific Northwest generally correlate reasonably well with log prices (or pond prices, the price of logs delivered to a mill) and stumpage prices (the price that would be paid to the landowner for the standing timber on their land). Stumpage prices are most relevant for understanding movement in timberland prices, but stumpage price data, particularly for private timberland, are not easily accessible.    

After peaking in 2017-18, Pacific Northwest log and lumber prices declined and remained low through the start of the pandemic. The decline in lumber prices has been attributed to perceptions that the pandemic would bring about a prolonged weakening of lumber demand from the construction industry. However, the demand for new housing, as well as remodels of existing homes, remained strong, leading to a lumber shortage. The shortage was created by several factors, including supply-chain bottlenecks and mill capacity constraints, culminating with a spike in softwood lumber prices in 2021. Similar increases in log prices have been reported by OSU Extension’s Lauren Grand in Lane County and for Douglas-fir stumpage prices from National Forests in the PNW. Lumber, log, and stumpage prices eventually came down as housing starts slowed, coinciding with the dip in timberland prices between 2021 and 2023, but have since increased and remained relatively stable.

I’m not showing the regional breakdown but note that both the Northwest and Southwest have followed similar trends over time, with timberland in the Northwest being worth about $4,000 more per acre on average since 1999. Over the past five years, the gap has widened, with average per-acre timberland prices of $15,586 in the Northwest and $10,573 in the Southwest.

Looking ahead forward, several key factors could shape Oregon’s timberland market. For one, President Trump issued an executive order in March that outlined a strategy to boost federal logging by 25%. The intent of the executive order goes hand in hand with another ongoing issue affecting the sector – trade with Canada, which supplies about 30% of the softwood lumber used in the US. Since August, Canadian lumber has been subject to a 14.5% tariff, a rate that was originally set to rise to 39.5% under Trump’s tariff plan. Although the tariff increase was scrapped amid industry push-back, ongoing federal investigations could result in increased tariffs in the near-term. On balance, greater tariffs would work against the softening of lumber prices that would result from a federal supply increase. These changes could lead to a more erratic land market, as we’ve seen in the past few years, but with minimal effect on long-term land price trends. In Oregon, Governor Kotek specifically mentioned the importance of lumber imports in light of her ambitious aims to address our housing shortage, so the way this all plays out could have rippling effects that are felt throughout the broader state economy.

Finally, wildfires have and will continue to pose a large risk to the forestry sector, not to mention the people and communities they affect. A recent analysis indicates that the combined effect of the post-2000 increase in the occurrence of large wildfires and climate change (namely increased drought) have already reduced timberland prices by 10% relative to what they would have been had pre-2000 wildfire and climate conditions remained.

Note: Timberland price data come from a database of property transactions I developed using CoreLogic’s proprietary nationwide property transactions database. The 1999-2024 timberland property sales used in this analysis are: (1) exclusively made up of forested parcels (per CoreLogic’s land use codes), (2) at least 10 acres in size and made up of fewer than 10 individual parcels, (3) priced between $100 and $60,000/acre, (4) at least 2 miles outside urban growth boundaries, (5) have a majority of land classified as privately owned based on a recent Oregon Department of Forestry GIS shapefile, and (6) have a majority of the sold area in forest cover at least once between 1985 and 2023 per the Annual National Land Cover Database. All prices are adjusted for inflation to the year 2024 using the Bureau of Economic Analysis’s Gross Domestic Product Implicit Price Deflator.

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Do trends in Oregon’s cropland prices reflect farm profitability?

Posted on April 11, 2025 by Dan Bigelow

In agricultural economics, we typically think of the value of farmland as representing the discounted stream of net income (or profit) that accrues to the landowner. This is sometimes referred to as the “fundamental market value of farmland.” Future net income is discounted because money earned in the future is worth less than the same amount earned today. The further into the future the income is earned, the more it is discounted. If we earned the income today, we could make an investment and reap some positive return from it. This hypothetical positive return represents the discount rate – i.e., what we give up in exchange for earning income later rather than sooner.

Importantly, the source of the income capitalized into the value of farmland can change when we think about the future profit from owning land. Because the income a landowner would receive from converting the land to a developed use (e.g., housing) is typically much higher than the income that could be earned from farming, discounting explains why land located close to cities commands a much higher price than comparable land with the same productivity located further away. Specifically, because development is generally viewed as being more imminent for lands close to cities, the future income from that potential future land-use change is discounted less steeply, which raises the land’s value.

A natural measure of the net income from farming is annual profit from producing and selling agricultural commodities. Profit, however, is hard to measure directly and is not well captured in any regularly updated data sources. As an alternative to profit, cash rent, the price a landowner charges to a tenant who farms the land, is often used to approximate the net income that a farmland owner would expect to receive in a given year. I’ve noted in previous posts how inflation-adjusted cash rents in Oregon have remained flat over the past 15 years or so.

In contrast, land values have mostly trended upward. The figure below shows the average per-acre price of irrigated and non-irrigated cropland in Oregon over the period 1999-2024 as a three-year moving average. (See the note at the end of the post for how I’m classifying land as irrigated or non-irrigated.) Irrigated land prices have more than doubled, from under $6,000 to almost $12,000 over the past 25 years, but the trend has flattened since 2022. Non-irrigated prices show more volatility, but despite a drop in recent years current prices are still up by about $2,000 (50%) over the 1999 three-year average. Both trends are generally in line with the annual land value estimates from USDA surveys. It is worth noting, however, that the sample size for non-irrigated cropland sales (1,956) is a lot smaller than that for irrigated cropland (8,467).

Rolling three-year average of irrigated and non-irrigated land prices in Oregon, 1999-2024

The profitability of a farmland investment is commonly measured using the rent-to-value ratio, which is just the rent divided by the land price (multiplied by 100). This is also referred to as the capitalization rate (or cap rate). It can be thought of as the rate of return to someone who buys and rents out farmland. The figure below shows the three-year rolling average cap rates for irrigated and non-irrigated farmland in Oregon for 1999-2024. Since the 2007-09 recession, both cap rates show a general decline, in line with what has been observed other regions of the US (see here and here).

Along with the cap rates, I’m also plotting the market yield on 10-year U.S. Treasury notes. These are typically considered a benchmark investment asset, representing a safe (or risk-free) way to earn interest income. Treasury yields are also used as the basis for mortgage rates, including farm mortgages. From a farmland investment perspective, the Treasury yield can be thought of as the return on a competing, safe interest-bearing investment.

Rolling three-year average irrigated and non-irrigated rent-to-value ratios (cap rates), 1999-2024

Overall, the trend non-irrigated cap rates appear to be more closely linked with Treasury rates. Because the non-irrigated cap rate lies below the Treasury yield for most of this period, it suggests the net income from farming alone (measured by cash rent) is not sufficient to justify the current prices of non-irrigated land. Another interpretation is that additional sources of land-related profit, or expectations of changes in future profit, would be needed to make purchasing non-irrigated cropland worthwhile. The low cap rate may also explain the relatively small number of non-irrigated cropland sales over this period, which itself suggests the non-irrigated cropland trends presented here should be taken with a grain of salt.

Up until the last couple of years, the downward trend in irrigated cap rates tracked fairly well with Treasury yields from 2012-2019. The fact that the irrigated cap rate lies above the treasury yield for most of the past 15 years indicates that the net farm income from irrigated crop production generally justifies its relatively high price. That’s not to say that current farm profitability is the only factor driving the demand for irrigated cropland, just that it alone is sufficient to justify its current price.

Of course, the analysis presented here should not be interpreted as investment advice, but rather as a general overview of how well trends in Oregon’s cropland prices reflect farm profitability. Given how diverse Oregon’s farm sector is, an important caveat is that the profitability of investing in farmland is likely going to vary considerably across the state, which I’ll leave for a future post. Additionally, Oregon’s farmland rental market is less fluid than those in other states (e.g., in the Midwest), which potentially makes cash rent a less reliable approximation of farm profit.

In terms of how cropland cap rates might change in the future, rents have been fairly stable across the board over the past 15 years. One thing that might change this is trade policy, which could affect commodity prices, and, in turn, farm profits and rents. Producers were at least partly compensated for the losses they suffered during the last trade war with China, so it is hard to say what will happen as things continue to escalate in the current round of tit-for-tat tariffs.

For farmland prices, the broad macroeconomic factor to keep in mind will be further changes in the Federal Reserve’s benchmark interest rate. Because higher interest rates cause future income to be discounted more steeply, farmland prices tend to have an inverse relationship with interest rates. The federal funds rate has gone up in recent years and although this seems to have cooled Oregon’s farmland market somewhat, it is worth keeping in mind that changes to the Fed’s benchmark rate can take a decade or more to be fully reflected in farmland values.

Notes: Farmland price data come from a database of agricultural property transactions I developed using CoreLogic’s proprietary nationwide property transactions database. The 1997-2024 agricultural property sales used in this analysis are: (1) exclusively made up of agricultural parcels (per CoreLogic’s land use codes), (2) between 10 and 2,000 total acres in size, (3) priced between $100 and $75,000/acre, (4) outside urban growth boundaries, (5) have at least 25% of the parcel area zoned exclusive farm use, farm-forest, marginal farmland, or non-public, and (6) have at least 25% of the sold area in crop production between 2009-2023 per USDA’s Cropland Data Layer.

Irrigated cropland is defined as land satisfying the above criteria and also having (1) 50% of the sold area covered by a primary irrigation water right per the Oregon Water Resources Department (OWRD) or (2) 50% of the sold area irrigated between 1997 and 2020 according to an updated version of the LANID data developed by Xie and Lark (2021). The latter is used because OWRD does not comprehensively account for water rights attached to land in irrigation districts. Non-irrigated cropland has no more than 10% of the sold area in both of these two categories.

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Do small parcels of farmland tend to sell for more in Oregon?

Posted on February 18, 2025 by Dan Bigelow

Note: This post has been updated to reflect a coding error that affected the numbers in the previous version. None of the overall conclusions regarding the differences in land prices between small and large parcels are affected, but it does affect the scale of the land prices shown in the table and figures. Apologies for the error. In addition, this post reflects an updated and more accurate version of the sales price data that runs through 2024.

A recurring feature of farmland markets throughout the US and other parts of the world is that smaller parcels of land tend to sell for higher per-acre prices. What explains this so-called “small parcel premium”? More importantly, how prevalent is this pattern in Oregon’s farmland market?

A popular theory is that the price premium attached to smaller parcels of land is driven by demand-side factors concerning the potential for non-agricultural uses. For example, a land developer looking to buy farmland is unlikely to be interested in purchasing 100 acres of land. Even at a relatively low housing density of 5 units per acre (0.2 acres per home), 500 residential homes could be built on 100 acres, which would be a massive housing development in most parts of Oregon. Of course, even less land would be needed to build a 500-unit apartment or condo complex. Similarly, smaller parcels of land are often sought by non-commercial producers (e.g., hobby farms, retirement farms), who may be willing and able to pay a price above the land’s value solely attributable to agricultural use.

Farmland price data: To look at the parcel size-land price relationship in Oregon, I assembled a database of farmland transactions using property transaction data from CoreLogic. This analysis focuses on transactions involving exclusively agricultural land parcels between 2000 and 2024, where agricultural land is identified based on CoreLogic’s property codes. To refine the sample, I only include land meeting the following criteria:

  • Located outside of urban growth boundaries
  • Zoned Exclusive Farm Use, Mixed Farm-Forest, or Non-public
  • Total area between 5 and 2,000 acres
  • Sells for a price of $100-$75,000 per acre

These restrictions yield a sample of 20,661 properties that could be reasonably considered to be in an agricultural use at the time of sale.

Two different ways to calculate an average price: To provide a high-level summary of the small parcel premium in Oregon, consider two ways of calculating the average price of land. One approach is to take the simple average per-acre price across all 20,661 sales, which I refer to as the unweighted average price. Alternatively, we can take the same average but weight each sale by its acreage, which puts more emphasis on larger sales and gives the average price of an acre of land as opposed to the average sale price.

To make the difference more concrete, suppose we have two sales with total sale prices of $100,000: (1) $10,000 per acre (10 acres) and (2) $1,000 per acre (100 acres). The unweighted average price would be ($10,000 + $1,000)/2 = $5,500 per acre, while the weighted average would be $10,000*(10/110) + $1,000*(100/110) = $1,818 per acre. To the extent that smaller parcels of land sell for a higher price, we would expect the weighted average to be lower than the unweighted average.

The table below summarizes the two different versions of the average per-acre price (adjusted for inflation to 2024 dollars) and the average sale area (in acres) for the state as a whole and by region. As you can see in the first row, the statewide weighted average price ($6,457) is dramatically smaller than the unweighted average price ($18,883). Naturally, the average acreage and price varies across regions due to differences agricultural production (e.g., eastern Oregon tends to have about 4x larger acreages compared to the Willamette Valley), and this is all mixed together in the statewide averages.

However, the same general pattern of differences in the two average prices holds in all regions. At most, the weighted average price is just over half of the unweighted price (Willamette Valley, OR Coast, and Southeastern OR). Northeastern OR and Central OR/Mid-Columbia have the biggest small parcel premiums by this measure, where weighted averages are less than one-third of the unweighted average.

Binned scatter plots: To break this down further, I summarize the weighted average price by region and acreage bin using binned scatter plots. These plots help illustrate patterns in data that are harder to detect with a scatter plot of raw data, which, with more than 20,000 observations, would look like something from a Rorschach test.

With the binned scatter plots, a clear pattern emerges showing that an acre of land in the smallest acreage category sells for the highest price. The pattern is most pronounced in the more populated parts of Oregon. In the Willamette Valley, an acre of land sold in a sale containing 5-10 acres sells for about $10,000 more than an acre of land in the next-largest bin (10-20 acres), and over $30,000 more than an acre in a 100+ acre sale. The small parcel premium remains clear in the less populated parts of the state. In Northeast and Southeast Oregon, which both have average sale acreages of over 100 acres, the smallest-acreage sales have prices that are about 20x and 10x the price of a normal sale in the 100+ acreage category.

Wrapping up: Overall, without digging in further and going beyond the scope of this blog post, it is harder to say much more about what is driving the small price premium in Oregon beyond the general factors I referenced at the start (demand from development potential and small hobby/retirement farms). I didn’t include it in the post to save space, but the same general pattern emerges if we look at different chunks of time (e.g., the 2000s versus the 2010s) or within counties instead of larger regions. From the fact that we have urban growth boundaries to the wide variety of agricultural outputs produced here, Oregon’s farmland sector is unique in a lot of ways. As far as the small parcel premium goes, this is one area where it fits in with the crowd.

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Estimating the Impact of Ag Overtime with Recent Farm Payroll Records

Posted on January 31, 2025 by Tim Delbridge

On January 1st, the Oregon agricultural overtime threshold dropped from 55 hours per week to 48 hours per week, as required by 2022 HB4002. Agricultural employees are now entitled to 1.5x pay for hours worked that exceed 48 hours in a week. On January 1st, 2027, the overtime threshold will fall to 40 hours per week. Oregon follows California and Washington in implementing similar ag overtime policy, and those states are now fully phased in to a 40-hour per week threshold. There has been plenty written on this topic in the popular press but there hasn’t been much analysis of the impact of ag overtime on farm profitability or worker pay.

In this blog post, I share analysis that my OSU colleague Jeff Reimer and I recently completed on the impacts of agricultural overtime in Oregon using farm-level payroll data from Oregon dairy, cherry and nursery producers1. We find that agricultural overtime will negatively affect farm profitability and, perhaps surprisingly, will decrease the weekly earnings of some farm workers. This analysis is valuable in large part because it is based on individual records of (anonymous) employee hours and wages that are not usually available to researchers.

How will labor costs change for farms?

Farm businesses face seasonal fluctuations in their labor needs, and these fluctuations differ by  commodity group. Using the provided payroll records from 2022 to 2024, we calculate the total number of hours for which each operation would have paid overtime under each of the three overtime thresholds (i.e. 55, 48, and 40 hours) had they been in place. Figure 1 shows the number of overtime hours by week for one of the cherry producers (Panel A), one of the dairy producers (Panel B), and one of the nursery producers (panel C). The seasonal fluctuation in labor demand that is apparent in the figure will be largely similar across operations in the same sector. The figure shows that cherry producers have a large spike in their labor needs during the harvest in June and July, but will have relatively few overtime hours the rest of the year. The dairy and nursery businesses, on the other hand, both have peak seasons (summer for dairy, early spring for nursery) but have employees working more than 40 hours per week in all seasons. Employees at dairy farms in particular tend to have a high average number of hours per week. As a result of these sector-specific patterns, the impact of new agricultural overtime laws will land differently on each farm type.

Figure 1. Overtime Hours by Week Under Different Overtime Thresholds (Jan. 2022 – Nov. 2024)

To estimate the financial cost of ag overtime to farms and the impact to the wages of individual workers, we use each employee’s actual wage rates and hours worked by week from 2022 to 2024. We calculate the gross wages that they would have earned during the period under a no-overtime scenario, as well as each of the three overtime thresholds outlined in Oregon House Bill 4002. Wages under the three overtime thresholds are calculated for all employees in all weeks and then converted to percentage increases relative to the no-overtime baseline wage. For example, an employee working 50 hours in a particular week and earning a base wage of $18 per hour would see a 0% increase in wages at the 55-hour threshold, a 2% increase in wages at the 48-hour threshold, and a 10% increase in wages at the 40-hour threshold.

The estimated percentage increases in labor costs are averaged across farms in each commodity group and are presented in table 1. Of the three agricultural sectors, the dairy employees work the highest number of hours per week over the course of the year and have the highest anticipated overtime costs at each threshold level, with total wages increasing approximately 7% and 12% under the 48 hour and 40-hour thresholds, respectively.

The cherry producers see a smaller increase in labor costs than the dairy farms, but a slightly larger increase than nursery crop producers. On average, the nursery crop producers included in this analysis would see an estimated increase in labor costs of slightly more than 4% under the 40-hour overtime threshold. It is important to note that all farming operations are unique, and differences in crop mix, farm size, and production factors such as weather may result in fluctuations in overtime hours from year to year and from one farm to the next.  

Table 1. Estimated percentage increase in labor costs at each overtime threshold, by sector

SectorNo. of Farms55 hours48 hours40 hours
Nursery30.10.74.2
Dairy53.66.811.9
Cherry21.953.36.3

The estimated percentage increases in labor expense that we estimate for each overtime threshold should not be confused with the percentage impact to net farm income. Since crop and livestock enterprises vary in terms of labor intensity and net profit margins, an equal percentage increase in labor costs will impact some farms more substantially than others. For example, based on a 2022 Oregon State University crop budget for sweet cherry production, a 10% increase in costs associated with pruning and harvest labor would amount to an additional cost of $380 per acre, representing a 30% reduction in net income to cherry production (Thompson and Seavert, 2022). That is, a small percentage increase in labor costs can have a large impact on the profitability (and financial sustainability) of farm businesses.

How will overtime legislation impact the pay of individual workers?

Increasing earnings for workers is a key goal of agricultural overtime legislation. Although workers that receive overtime pay of 1.5 times their base wage rate are likely to see an increase in their average hourly wage, it does not necessarily follow that the total earnings will be higher for individual workers under the new rules. With agricultural overtime laws in place, farm managers have a strong incentive to organize work schedules in a way that minimizes overtime costs, and this may include reducing the hours per week that an employee works. In fact, data on farm worker employment from the Bureau of Labor Statistics (BLS) show that the average number of hours worked per week per employee has fallen in California relative to the nationwide averages, just as their ag overtime policy phased in (USDA-NASS, 2024; Figure 2).

Figure 2. Average Hours Worked Per Week by Farm Workers

Among the Oregon farms that have provided both 2022 and 2023 payroll data for use in our analysis, some have shifted work schedules to reduce overtime pay. Table 2 shows the impact of the 55-hour overtime threshold on employees of one of the Oregon dairy farms that provided data. This table shows five employees that: 1) averaged more than 55 hours of work per week in 2022, 2) were paid hourly in each year, and 3) were employed by the farm for the full two-year period. Each of these employees worked fewer hours in 2023 and earned less in total wages in 2023 than in 2022, despite the higher average hourly wage earned as a result of overtime pay. This result is consistent with the conclusions of Hill (2023) and Hill and Tanabe (2023), which used the National Agricultural Workers Survey to show that average weekly earnings fell for many employees following implementation of agricultural overtime in California.

Table 2. Average Weekly Wages and Hours Worked for Five Individual Employees in 2022 and 2023

Employee2022 Avg. Weekly Wages (no overtime)2023 Avg. Weekly Wages (OT at 55-hours)Avg. Weekly Hours (2022)Avg. Weekly Hours (2023)
Employee A$1,192$1,11071.262.5
Employee B$1,088$1,08255.453.2
Employee C$1,153$1,14459.155.7
Employee D$1,096$95460.951.5
Employee E$1,024$88955.847.7

Not all farm managers that contributed data for this analysis reduced the number of overtime hours that their staff worked in 2023 and 2024, though the pressure to minimize costs has led them to take other steps. Some operations have reduced year-end bonuses, or report feeling less pressure to increase the base-wage rates of employees that now earn overtime pay. Some operations have few workers that exceed 55-hour work weeks and have not yet made adjustments, but anticipate the need to make substantial changes to comply with the 48-hour threshold that started on January 1, 2025.

Farms will face strong pressure to minimize labor costs for their own financial survival, while also feeling pressure to provide enough work to retain their skilled, and often long-term employees. Producers of dairy and nursery crops face significant competition from low-cost states without agricultural overtime laws and will be unable to pass on cost increases to consumers. The cherry industry is concentrated in states that also have ag overtime laws, which presents a more level playing field, but the industry as a whole is already struggling with profitability challenges. On the employee side, we should expect some farm workers to seek second jobs, which may be with other farms, or outside of agriculture. In any case, this is likely to be a period of disruption in Oregon agriculture.

  1. We thank the farm owners that generously shared data with us for this analysis. Funding for this work was provided by Columbia Gorge Fruit Growers, the Oregon Association of Nurseries, the Oregon Dairy Farmers Association, the Oregon Farm Bureau, and the Agricultural Experiment Station of Oregon State University. ↩︎

References:

Hill, A. and T. Tanabe. 2023. Potential Impacts of Overtime Laws for US Crop Workers. Choices, 38(2).

Hill, A. 2023. California’s Overtime Law for Agricultural Workers: What Happened to Worker Hours and Pay? ARE Update. Vol. 27, No. 1.

Thompson, A, and C. Seavert. 2022. Enterprise Budget: Cherries, Sweet, Fresh Market. Oregon State University. AEB 0069.

USDA-NASS. 2024. Farm Labor. Available at: https://usda.library.cornell.edu/concern/ publications/x920fw89s?locale=en

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How does Oregon’s tiered minimum wage policy affect restaurant survival?

Posted on October 15, 2024 by Richard Acquah-Sarpong

Oregon’s minimum wage changes have historically been tied to the Consumer Price Index. However, in 2016, the State of Oregon implemented an innovative tiered minimum wage policy that allows the minimum wage to vary by geographic region. Under this policy, the highest minimum wage tier is set for the Portland Metropolitan Area, followed by a lower tier for other urban counties and the lowest for rural counties (Figure 1). The regulatory drive behind this tiered policy was a recognition of the regional economic differences in wages, unemployment, and cost of living within the state. Living in the Portland metro area tends to be more expensive than living in the rest of the state, and it is generally less expensive to live in non-urban counties compared to those near urban centers. The policy was designed to be less burdensome for employers outside the Portland Metro area, as it could be more difficult for them to pass higher wage costs on to consumers in the form of higher prices.

Figure 1: Oregon minimum wage tiers

Figure 2 shows the growth of Oregon’s minimum wage for its three tiers before and after the introduction of the tiered minimum wage policy in July 2016. The policy implemented uneven annual wage increases over a six-year period, taking into account the differing living costs across the state, with the goal of reaching the 2022 – 2023 scheduled target (see Table 1 below). Starting in 2023, the minimum wage will be adjusted annually based on inflation, as measured by the State’s Consumer Price Index for All Urban Consumers (CPI-U), while keeping the tiered wage system in place. Under this system, rural employers will pay $1 less than urban employers, and those in the Portland metro area will pay $1.25 more than other urban employers. As a result, the minimum wage in the Portland metro area will be $2.25 higher than in the state’s rural counties with the lowest population densities.

Figure 2:Oregon Minimum Wage Trend

Establishments, particularly small businesses, may struggle to absorb wage increases depending on their location and industry.  For example, certain industries, such as food services, retail, hospitality, and agriculture, traditionally operate with thin profit margins and are heavily reliant on low-wage labor. For these businesses, a significant portion of their expenses is tied to wages, and any increase in labor costs over time can erode their profitability quickly. Businesses in these industries may find it more challenging to absorb minimum wage increases compared to industries with higher profit margins or those that rely less on low-wage workers. As a result, the chances of businesses to continue operation while enduring the pressures from rising minimum wages, can vary depending on how labor is used intensively in the industry.

In recent research, we explore the impact of the three-tier minimum wage policy on restaurant survival in Oregon. We do this by comparing restaurant survival in Oregon to that of similar restaurants in Idaho, where the minimum wage has remained fairly constant over time. Idaho’s adherence to the federal minimum wage (see Figure 1), which has remained constant at $7.25 per hour since 2009, contrasts with Oregon’s dynamic and tiered approach. Since it’s not possible to conduct a real-world experiment with minimum wage policies, we use Idaho as a proxy to estimate how restaurant survival rates in Oregon might have evolved if the tiered minimum wage policy had not been implemented. Our analysis focuses exclusively on urban and rural counties, intentionally excluding the Portland Metro area as there are no cities as large as Portland in Idaho.

Drawing on data from the National Establishments Time Series (NETS) Database, the analysis focuses specifically on establishments that were operational in 2011 and track their survival through 2021. We analyze the survival of 1,803 restaurants located in urban areas of Oregon, comparing them to an equal number of similar restaurants in urban Idaho. Similarly, we assess the survival of 1,224 restaurants in rural Oregon and compare them to an equivalent number of similar establishments in rural Idaho. Figure 3 shows the survival of these restaurants in both urban and rural areas of Oregon and Idaho. In the left panel, we compare the survival of urban restaurants in Oregon to those of similar establishments in urban Idaho. The right panel offers a parallel comparison for rural areas, examining the survival of rural Oregon restaurants against their counterparts in rural Idaho.

Figure 3: Urban and Rural Trends in Survival of Restaurants.

The survival of restaurants in urban Idaho shows a steady decline over time, starting at around 1.0 (full survival) in 2011 and gradually decreasing until 2021, when the survival rate dropped to around 0.65. Prior to 2016, the survival rate in urban Oregon followed a downward trend similar to that of urban Idaho. However, it appears to have declined faster than urban Idaho after 2016 (indicated by the dashed line). By 2021, urban Oregon has a marginally lower survival rate than urban Idaho. The survival rate of rural Idaho restaurants declines similarly to urban Idaho, with a slow but steady decrease from 2011 through 2019, reaching approximately 0.63 by the end of the period. The observed trend suggests that establishments in urban Oregon faced more significant challenges in absorbing the effects of wage increases than their Idaho counterparts. These urban businesses, which already tend to have higher operating costs (such as rent and utilities), were more susceptible to the pressures of rising wages.

In our research paper, which uses a statistical model to estimate the impacts of Oregon’s minimum wage policy, we estimate that the implementation of the tiered minimum wage policy has led to an average decline of about 3.3% in the cumulative likelihood of survival among urban restaurants. In contrast, the policy showed no significant impact on the survival rates of rural establishments. Furthermore,  our analysis shows no statistically significant effect on urban chain restaurants. However, we find a much stronger and statistically significant impact—around 3%—on non-chain restaurants. This suggests that fast-food chains, which typically operate with more excess labor, can downsize while maintaining operations, or perhaps they have the financial flexibility to invest in labor-saving technologies, making them more resilient to wage increases.

While tiered minimum wage policies are intended to reduce regional disparities and promote economic equity, it is essential for policymakers to carefully consider the associated trade-offs. These policies can inadvertently create significant challenges for businesses, impacting their ability to sustain operations. The notable decline in restaurant survival rates in urban Oregon illustrates the unintended consequences that can emerge when wage increases are implemented without supportive measures for affected establishments. This scenario highlights the need for Oregon policymakers to balance the objective of raising workers’ wages with the imperative of ensuring business viability in both urban and rural areas. To address these challenges, Oregon policymakers should contemplate accompanying wage increases with targeted support programs for businesses. Such measures could include tax incentives, grants, or access to low-interest financing specifically designed to alleviate liquidity constraints faced by establishments adjusting to higher payroll expenses. By providing this support, businesses can better manage the financial impact of increased wages, reducing the risk of closures and job losses.

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Stable statewide cash rents for Oregon mask large changes across counties in 2024

Posted on September 16, 2024 by Dan Bigelow

Agricultural producers can gain access to the land they need through two general channels. Some own their land, after purchasing it from another landowner, bidding on it in an auction, or inheriting it from a family member. The alternative to ownership is renting land from another producer or a non-operating landowner (a person who owns land but is not actively involved in agricultural production). Per the most recent data published in the 2022 Census of Agriculture, rented farmland in Oregon accounts for 29% of all farmland in the state. This is relatively low compared to the national figure, which stands at 39%, but still accounts for roughly 4.5 million acres of land in the state.

The comparatively low rental percentage in Oregon likely can be chalked up to a few things. One is the large amount of grazing (pasture and range) land in the state. If it is not owned by the federal government, grazing land is generally more likely to be owned by the producer using it. There is also a large amount of irrigated cropland in Oregon – roughly 46% of all harvested cropland in the state was irrigated in 2022 – which is also less commonly rented out due to the capital and maintenance costs associated with irrigation infrastructure. For example, of Oregon’s farms where all of the harvested cropland was irrigated, only 24% of the land was rented. These farms account for 39% of all farmland in the state, but only 10% of all farmland in the US.

Each year, the US Department of Agriculture’s National Agricultural Statistics Service (USDA-NASS) publishes cash rental rates at the state and county levels. The county-level data come from a cash rental rate survey conducted every summer to collect information on the cash rents paid for non-irrigated cropland, irrigated cropland, and pastureland. A unique aspect of this survey is that it provides county-level data on an annual basis. Additionally, at just one and a half pages in length, the survey is shorter and less complicated than other USDA surveys, and as a result, the response rate tends to be relatively high. In 2024, 55% of the 3,349 surveyed producers responded to the USDA-NASS cash rent survey in Oregon. This is actually down from the 70% response rate in the 2023 survey, so the latest numbers should be interpreted with that in mind. The state-level cash rent data come from the same June Area Survey that USDA-NASS uses as the basis for its annual farmland value estimates (see my recent blog post here).

Note: Values in the figure are adjusted for inflation to the year 2024 using the Bureau of Economic Analysis’s Gross Domestic Product Implicit Price Deflator.

Over the past year, the statewide cash rent for irrigated cropland increased by 0.8% in inflation-adjusted terms, bouncing back from declines in the previous two years. Irrigated cropland tends to be rented for much more than non-irrigated cropland, due to the higher returns associated with irrigated production and the costs of maintaining irrigation-related equipment and water conveyance infrastructure. In 2024, irrigated cropland was rented for an average of $266/acre, which is in line with the average rent over the previous five years (2019-2023). Looking across the state, irrigated rents tend to be highest in the northern Willamette Valley and other counties along the Columbia River (Hood River, Morrow, and Umatilla). With a couple of exceptions (Klamath and Malheur), counties in the eastern, central, and southern parts of the state tend to see lower irrigated cash rents. The largest percentage gains over the previous year occurred in Clackamas and Morrow, while Deschutes, Baker, and Klamath saw the largest declines.

Note: The color shading corresponds to the cash rental rate reported for 2024. Where present, the numeric value on the map corresponds to the 2023-24 real percentage change in cash rent. Shaded counties without a numeric label did not report a rental rate in 2023. 

In contrast to irrigated cropland, non-irrigated cropland rent, at $107/acre, was down by 1.85% over the past year. Note that the nominal 2024 rental rate of $107/acre is identical to the one reported in 2023, so the decline is entirely due to the inflation adjustment. Compared to the inflation-adjusted average over the previous five years, the 2024 rate is down by about $5/acre. Counties in the northern and mid-Willamette Valley, along with Tillamook County, tend to have the highest rents. Given its dry climate, Eastern Oregon tends to have lower non-irrigated cash rents. Over the past year, the largest annual percentage gains were in Umatilla and Clackamas, whereas Union, Tillamook, and Wasco had relatively large percentage decreases.

Note: The color shading corresponds to the cash rental rate reported for 2024. Where present, the numeric value on the map corresponds to the 2023-24 real percentage change in cash rent. Shaded counties without a numeric label did not report a rental rate in 2023. 

The average 2024 pasture cash rent was $11.50/acre. Like the non-irrigated cropland rent, this value is unchanged in nominal terms compared to the previous year but represents a 1.85% annual decrease after accounting for inflation, and continues a general downward trend since USDA-NASS started their current rental rate reporting program. Although the dollar values involved tend to be lower on a per-acre basis, pasture operations tend to be much larger, so small deviations in rental rates can add up quickly. Pasture rents have generally declined continuously since 2009, with the 2024 rent being about $2.50 (or 18%) lower than the 2019-2023 average of $14/acre. Western Oregon tends to have the highest pasture rents, while eastern Oregon, where farms tend to be larger, have lower per-acre rents. Lower average pasture rents give way to large percentage changes from year to year. For example, Gilliam and Harney had 85 and 45% respective gains, while Polk (-30%) and Columbia (-22%) had large declines.

As I’ve mentioned before, it bears emphasizing that the USDA-NASS pasture rent figures paint an incomplete picture of the rental market for this type of land. This is because the USDA survey only reports on land rented for cash, but most private grazing land is rented on a per-animal unit month (AUM) or per-head basis. In addition, a considerable fraction of land in grazing operations comes from public land owned by the Bureau of Land Management or U.S. Forest Service, with those lands also rented on a per-AUM basis.

Note: The color shading corresponds to the cash rental rate reported for 2024. Where present, the numeric value on the map corresponds to the 2023-24 real percentage change in cash rent. Shaded counties without a numeric label did not report a rental rate in 2023. 

Cash rents can be a useful snapshot of the overall health of the farm economy, as they are heavily influenced by the net returns to agricultural production. Nationwide, cash rents reached a record level this past year, which may squeeze farm profits for renters when other input costs remain high amid falling commodity prices.

Rents also tend to be a lagging indicator. Leases for the upcoming year tend to be negotiated following harvest in the late fall, winter, or early spring, so the values reported by NASS for 2024 are more reflective of what landowners and renters expected the year to bring, not what actually happened. In addition, some leases, particularly for irrigated farmland, tend to be renewed on a multi-year basis. Thus, for example, a three-year fixed-cash lease covering the 2022-2024 production years could also be included in the 2024 NASS values, which makes it further removed from current production conditions.

Because purchasing land outright typically requires extensive financial capital (e.g., money for a down payment and other land currently owned as collateral), renting is often seen as a way for new and beginning producers, or producers who are otherwise financially disadvantaged, to build and grow an operation. Land rental, however, is far from being limited to smaller producers, as discussed in this 2016 USDA report that I coauthored. Most commercial farms in the US contain a mix of owned and rented land. In addition, it can be difficult for beginning producers to find land to rent, as landlord-tenant relationships tend to be fairly long-lasting, despite the fact that most contracts for farmland are renewed annually, and about one-third of land is rented between family members.

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Food Price Inflation and the Farm Share of the Food Dollar

Posted on August 27, 2024 by Tim Delbridge

Rising food prices seem to be on everyone’s mind these days. Consumers are frustrated that prices have not come down from pandemic levels, even after the reasons for those cost increases seem to have abated. Food price inflation has slowed this year according to official CPI numbers, but consumers still perceive prices to be increasing quickly. The proposed merger between Kroger and Albertsons highlights the growing concentration in the food retail sector, and the proposal has generated concern among the public as well as federal regulators. Here in Oregon, the merger would result in the sale of 60 Kroger stores to C&S Wholesale Grocers. In the last week, the issue was further elevated when food prices were brought up by the Kamala Harris campaign and the idea of a federal ban on price gouging was floated.

Since I spend most of my time working on issues related to farm production and profitability in Oregon, for me, the discussion of food prices always leads back to the relationship between the prices that consumers face at the grocery store and the prices that Oregon farmers and ranchers receive for their products. The ‘price spread’ is the difference between what consumers pay at the store and what farmers receive. This gap covers the costs of processing, shipping, marketing, and any profits made along the way. An increase in the price spread could be caused by an increase in the cost of shipping, increased labor costs among processors, increased cost of regulatory compliance, or an increase in the profits generated by processors and retailers.

The degree to which retail prices filter down to the farm sector also depends on market power and concentration at the processing and retail levels. For example, if a competitive meat processing market became a monopoly overnight, we would expect the price spread for meat to increase because the processor would be able to charge higher prices while passing relatively little on to beef producers.

This blog post will use historical beef price data to discuss the changes in the retail-farmgate price spreads and farm share of the retail food dollar over time. Beef is a good example because cattle production is spread across many small beef producers, processing is concentrated largely in the hands of four very large firms, and recent increases in meat prices are often a source of consumer complaint. While this type of simple analysis cannot identify the specific reason for a change in the farm-retail price spread in a given quarter or year, it can reveal the degree to which food expenditures are captured by supply chain steps downstream from the farm. It can also be helpful when thinking about the impact that further consolidation might have on the food prices and farm profitability.

These figures, based on USDA-ERS meat price data, show the price spreads and farm share of the food dollar for beef. Price spreads for other commodities are available here. For the beef industry in particular, the value captured by processing, distribution, and retail has increased by a factor of 15 over the past 5 decades. The farm share of the retail beef dollar has fallen from 65% to about 45%, dipping below 35% during the pandemic. Although it is difficult to generalize, these charts can help us put the current discussion about market power and food prices into perspective.

I think there are three main conclusions to make.

  1. The Covid years were very difficult for some sectors. Meat processing provides a perfect example of a Covid-related capacity constraint that temporarily changed the relationship between producers and processors and led to high retail prices (see Lusk et al., 2021 for more detail). As meat processing facilities reduced throughput because workers were sick or to comply with health and safety protocol, the volume of meat being processed fell, driving down average farmgate prices. In other agricultural sectors, shipping costs, input prices, and labor costs increased rapidly, and the processors/distributors share of the food dollar increased.
  2. In the case of beef at least, the farm share of the food dollar has recovered in the last year or two as the pandemic has faded and supply chains have normalized. Cattle inventories are currently at historically low levels and many beef processors are struggling to maintain their desired production volumes. This should not be taken as a conclusion that there is not significant market power in meat processing, but the market dynamics currently give beef producers a stronger hand in the market. We may see price spreads adjust downward again as cattle inventories return to more typical levels.
  3. The farm share of the food dollar will look different for commodities like beef, milk, and potatoes than it will for highly processed foods. Intuitively, the supply chain costs for highly processed foods are much higher than for “whole” foods. As diets have incorporated more highly processed foods, farm revenues have increased at a slower rate than food sales. It remains an open question whether or not the farm share of the overall food dollar will shrink further, or if we have reached a point of stabilization.

Further Reading: This is a huge topic and there is a lot of academic literature that has addressed food prices, market power, and the consolidation in the modern food system. A few interesting academic works and other resources are below:

  • Ma et al., 2017: An article about market power in grocery, which reminds us that market power can also exist at the neighborhood level.
  • Howard, P. H. 2016. Phil Howards book “Concentration and Power in the Food System: Who Controls What We Eat?” is not an economic approach to this topic, but he presents an interesting viewpoint and does rigorous work. There are some excellent figures.
  • Raw data on retail food prices, rather than agricultural commodities are managed by the Bureau of Labor Statistics. They can be found here.

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Latest USDA estimates point to continued strong growth in Oregon’s farmland values

Posted on August 22, 2024 by Dan Bigelow

The US Department of Agriculture (USDA) recently released its latest state-level data on farmland values. The data come from the USDA’s June Area Survey, which asks a rotating panel of producers to estimate the market value of their land. Responses from surveyed farmers are then weighted and extrapolated to generate estimates for entire states. The survey-based estimates are broken down into four categories of per-acre land values: (1) farm real estate, measuring the value of all land and buildings on the farm, (2) non-irrigated cropland, (3) irrigated cropland, and (4) pastureland.

In Oregon, the per-acre value of farm real estate is $3,720 in the most recent data, representing a $220 (6.3%) increase in nominal terms over the past year (see Figure 1 and Table 1). Note that this is in nominal terms, meaning that it is not adjusted for inflation. In addition, this is based on a revision to the previous five years of land value data. After the release of the five-year Census of Agriculture data, the previous five years of annual land values are subject to revision. Because the 2022 Census pointed to higher land values than revealed by the annual survey, this resulted in an upward revision for Oregon’s 2019-2023 values. For example, the 2023 nominal value that was previously reported as $3,180/acre is now $3,500/acre.  

Figure 1: Per-acre farm real estate (land and buildings) value, Oregon, 1999-2024

It is often informative to examine trends in farmland values over time using real (or inflation-adjusted) values, which account for shifts in values relative to incomes and the prices of other goods. After adjusting for inflation using the Bureau of Economic Analysis’s Gross Domestic Product Implicit Price Deflator, the change in farm real estate value amounts to a $154 (4.3%) increase in 2024 dollars. When compared to its most recent 5-year average, real farm real estate values are up $281 (8.2%). The value of Oregon’s farm real estate continues to outpace inflation, with 2013 being the last time an annual reduction in the statewide real value was observed. In nominal terms, farm real estate values have not decreased since 2009 during the Great Recession.

Table 1: 2024 USDA farmland value estimates for Oregon

After decreasing over 2022-2023, non-irrigated cropland value rebounded in 2024, increasing by $96 (3.3%) in real terms to $3,010/acre. The value of irrigated cropland continued its upward trend over the past year, increasing to $7,650/acre, a $253 inflation-adjusted gain of 3.4%. Pastureland value, at $1,050/acre, increased by a more modest 1% over the past year. Relative to their 5-year rolling averages over 2020-2024, all classes of land values point to strong growth in 2024. With few exceptions, the values for all categories of Oregon’s farmland have generally more than kept up with inflation in recent history (see Figure 2).

Figure 2: Inflation-adjusted farmland values for different land uses, Oregon, 1999-2024

With aggregated state-level data, it is difficult to tease out any direct cause of the observed trends or year-to-year changes. The strong growth across the board in Oregon stands out compared to other states in the Pacific Northwest (Table 2). For all farmland value categories, Oregon’s growth in 2024 was more than double the growth observed in Washington. With the exception of pastureland in Idaho, Oregon’s growth rates were also higher than those of California and Idaho. In level terms, however, land values in Oregon generally remain below these other states.   

Table 2: 2024 farmland values in Oregon, Washington, California, and Idaho

Using a proprietary database of sales transactions, recent analysis by AgWest Farm Credit points to several factors that have affected land values in Oregon, including low inventories of land available for sale, strong interest in purchasing land from institutional investors (and buyers from Idaho), and a positive outlook on current-year water availability. The AgWest report also notes the weak relationship between farm profits and land values in recent years, suggesting that investment activity and other factors not directly related to farming are playing an increased role in farmland markets. These factors have bolstered land values despite the relatively high interest rates seen over the previous few years. When interest rates are higher, land values are generally expected to go down, as debt payments for land purchases go up and landowners put a greater discount on the net income they expect to receive from the land in future years. Interest rates are now are expected to go down in the near term, suggesting that any downward pressure current rates are exerting on land values will subside.  In addition, it is worth keeping in mind that the June survey used to construct the USDA estimates took place prior to the large wildfires that have affected producers in eastern Oregon.  

Of course, the fact that Oregon’s agricultural land has continued to appreciate in value has both pros and cons. Investors tend to be attracted to farmland because it generally keeps pace with inflation, which makes it an attractive and relatively safe asset class. Having access to affordable farmland is key for producers, as real estate is the most common source of collateral in farm-related loans. In addition to investment interest, the AgWest report also notes stronger demand from large operators, suggesting that small producers are increasingly at a disadvantage when it comes to accessing both the land and financial capital needed to grow their operations.

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Pasture, Rangeland, Forage Insurance in Oregon

Posted on July 16, 2024 by Tim Delbridge
Credit: Tim Delbridge

I spent most of last week traveling in Eastern Oregon to speak with livestock producers, and the subject of Pasture, Rangeland, Forage (PRF) insurance came up in conversation. It is clear that PRF has become increasingly popular, and may even be impacting land prices and lease arrangements for grazing land. In this blog post I will discuss some basic information about the PRF insurance product and share participation and loss ratio outcomes for Oregon. Later in the post, I link to a spreadsheet that contains more detailed county level data on PRF participation, premiums, and payments.

The PRF insurance program is designed to help livestock producers manage the risk of poor forage production. It is essentially a rainfall “index insurance”, meaning that neither the insurance premiums nor the insurance payouts (known as “indemnities”) depend on the management or production outcomes of the individual producer. Rather, the premiums and payouts of the PRF program are based on monthly rainfall totals in a specified grid location. This type of index insurance has the advantage of low administration costs, as farm-level yields and losses do not need to be verified before payouts are made. The drawback is that the forage production on individual pastures may not be highly correlated with the rainfall index for the larger grid, which weakens the effectiveness of PRF as a risk management tool for individual ranches.

Livestock producers are eligible to insure at coverage levels up to 90% of the expected precipitation amount and must choose how to distribute their coverage over the calendar year. Like other USDA crop insurance programs, PRF premiums are subsidized, with the subsidy percentage based on the coverage level chosen by the producer. For more detailed explanation of the purchase process, and for information on national PRF outcomes, please see this excellent article by Jay Parsons, John Hewlett, and Jeff Tranel.

PRF Insurance has become increasingly popular in Oregon. Figure 1 shows the number of acres insured under PRF from 2016 to 2024. Insured acreage has grown rapidly in the state, with roughly 17 million acres insured. There has been similar participation growth at the national level, with nearly 300 million acres insured in 2023 (USDA-RMA, 2024).

Producers that buy coverage under the PRF program will receive payments if the precipitation index is below the trigger level for the specified months. Given that recent years have been drier than average in much of the state, a large percentage of purchased PRF policies have resulted in indemnity payments. Figure 2 shows the average “producer loss ratio” for PRF coverage in each county in 2022. The producer loss ratio is defined as the insurance indemnity divided by the net premium paid by the producer (i.e. premium less the premium subsidy). For example, in Union County, the producer loss ratio is 2.26, meaning that for each dollar that the producer paid in PRF premiums, they received an average of $2.26 back in indemnity payments. This is close to the Oregon average producer loss ratio since 2016. A spreadsheet with county level PRF outcomes from 2016 to 2023 can be found here.

Because the PRF insurance is based on a rainfall index, the payouts are correlated with drought conditions. Figure 3 shows the drought monitor map for October 11, 2022. While not a perfect match, we can see that the areas in drought are more likely to receive higher payouts from PRF coverage.

Crop insurance is often viewed as a gamble, with farmers and ranchers wondering if the decision to insure will pay off. Looking at the map of producer loss ratios alongside the drought monitor map is a good reminder that this program is designed to reduce the financial risk posed by low rainfall and reduced forage production. A “good year” for forage is more likely to be a “bad year” for PRF insurance, and vice versa. Livestock producers should carefully consider how a year of poor pasture conditions will affect their revenues, and whether PRF insurance could help protect them from these outcomes. Also worth considering is that in Oregon and in the U.S. as a whole, in each year since 2016 producers have received more than they’ve paid in premiums.

References:

USDA-RMA. 2024. “Nationwide Summary – By Insurance Plan”. Summary of Business. Available at https://www.rma.usda.gov/SummaryOfBusiness. Accessed July 16, 2024.

Parsons, J., Hewlett, J. and Tranel, J. 2023. “Managing Risk in a Small Agricultural-base Business.” RightRisk News, Vol. 11, Issue 2. RightRisk Education Team. Laramie, WY.

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Unpacking the 2022 Census of Agriculture

Posted on June 26, 2024 by Dan Bigelow

Over the past few months, I’ve been analyzing what the 2022 Census of Agriculture reveals about Oregon’s agricultural sector. Two data points that have garnered attention concern the loss of 667,000 acres of Oregon’s farmland and the substantial 29% gain in the per-acre value of Oregon’s farm real estate. Both findings were discussed in a recent episode of OPB’s Think Out Loud (I’m better in print). Now that I’ve gotten a better grip on the full picture painted by the Census, I want to put these results, and how they should be interpreted, into context.

Decline in farmland: The 667,000-acre (or 4%) decline in Oregon’s farmland area over 2017-2022 is strikingly large. Although Oregon still has over 15 million acres of land in farms, this decrease represents an area more than seven times the size of Portland or 72 times the area of Corvallis. In addition to the reported loss of Oregon’s farmland, the Census also shows a significant decline in the number of farms, which dropped by 2,069 to 35,547, a 5.5% decrease from 2017. It’s worth noting that the previous Census in 2017 showed a farm gain (compared to 2012) of 2,177, which offsets the decrease shown in the latest year. At the same time, the 2012-2017 Census change pointed to a 339,000-acre decrease in Oregon’s farm acreage, which seems odd but not totally implausible.

What explains the fluctuations in the number of farms? The USDA defines a farm as “any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the census year.” This administrative definition probably doesn’t match what most people think of as a bona fide farm or ranch operation. It’s important to note that the $1,000 sales threshold doesn’t actually need to be met,  only that it would have been met in a typical year. This relatively loose definition is important when considering the scope of Oregon’s farm population. Specifically, 9,465 (about 27%) of Oregon’s farms had less than $1,000 in sales in 2022. And note that the number of farms in this group, those with less than $1,000 in sales, actually decreased by 2,197 in 2022, suggesting it accounts for at least some of the decline in the overall farm count.

Regarding the 667,000-acre decrease, where did all the farmland go? We certainly did not develop 667,000 acres worth of housing, a conclusion I worry people are tempted to jump to when seeing this figure. The Census data indicate that about half of the decrease was from the loss of cropland and half from pasture. Other land-use data sources, however, paint a different picture. If we compare the National Land Cover Dataset, a satellite-based data product from the US Geological Survey, for 2016 and 2021 for Oregon, we find that only about 80,000 acres of cropland moved to a different land cover, typically pasture, grassland, or shrubland. About 2,300 acres went from cropland to development. Similar results are obtained for the pasture/hay category.

Another commonly used land use data source is the USDA’s National Resources Inventory (NRI), which is based on a combination of aerial imagery and ground-truthing. Unfortunately, we don’t yet have the most recent NRI data for 2022, but the changes from 2012 to 2017 provide insight. Over this period, the Census reports that Oregon lost 339,000 acres of farmland. The NRI, in contrast, puts that at more like 10,000-20,000 acres, depending on which categories are counted as being agricultural uses (e.g., rangeland is sometimes, but not always, used for livestock grazing).

In addition, the NRI, which is designed to track land-use change, shows that the rate of land development in Oregon and elsewhere has declined substantially over the past couple decades. Farmland does get developed, but we aren’t actually losing farmland, in a land-use sense, at anything near the rate suggested by the most recent Census. Given all of this, it seems more likely that a good chunk of the 667,000 acres was misplaced, rather than lost.

Increase in land values: The 29% increase in Oregon’s per-acre farm real estate value, adjusted for inflation, is also substantial. This compares to gain of about 9.5% in the US as a whole, and puts Oregon fourth in the US in terms of its rate of farmland value appreciation, behind Utah, Wyoming, and New Mexico, and slightly ahead of Colorado and Idaho. The value of Oregon’s farmland has been rising over the past several decades, but did it really go up by 29% in such a short period?

It’s worth noting how the Census tracks the value of farmland. Respondents are asked to estimate the current market value of all land and buildings that are part of their farm. These values are not based on actual market transactions but rather on people’s perceptions of their land’s value, including land they rent and never purchased.

Other sources confirm an increase in Oregon’s farmland value but not by as much. The annual USDA land value report, which provides state-level information, indicates a 9% gain in per-acre farm real estate value over the same period covered by the Census, largely driven by increases in the value of irrigated cropland. This report, like the Census, is based on self-reported producer estimates of land value. Observed farmland transaction prices show similar gains to the annual USDA data, though sales prices can fluctuate due to the amount of land bought and sold in a given year. The most recent farmland value report from AgWest Farm Credit, which is based on observed transactions, provides another data point showing more modest gains in the value of Oregon’s land.

Putting all of this together: An advantage of the Census is that it provides a rich data set covering all sorts of things down to the county level, which is useful for understanding what’s driving the state-level numbers. For example, the top three counties in terms of farmland value gains—Jefferson (80% increase), Benton (70%), and Wasco (68%)—also saw significant decreases in farm acreage. Jefferson County, for instance, lost 250,000 acres (32%) between 2017 and 2022, mostly due to a decrease in grazing land and woodlands. Benton County lost 24% of its land (about 30,000 acres), mostly woodlands. Wasco County lost 30% of its land (about 410,000 acres), with over 90% classified as grazing land. Similar patterns are seen in Sherman, Union, and Curry counties. In general, the recent Census appears to have accounted for disproportionately less of the lower-valued land in these counties, which sort of mechanically drives up the county-wide value of what’s remains.

In general, counties that lost a lot of farmland tended to see large gains in farmland value, but the converse doesn’t always hold. Crook and Lake county, for example, saw increases in farmland acreage and increases in farmland values of more than 60%. The point is that we need to think carefully about all of the different factors that are changing when drawing conclusions based on the Census data.

Another factor to keep in mind is that the Census is really more of a comprehensive survey. The response rate in 2022 was 61% nationwide, down from the 70-75% response rates obtained for the last two Census years. Lower response rates inherently introduce more noise and less certainty in the estimates. Many of the counties with large farmland acreage declines experienced severe droughts in the years leading up the Census which could have conceivably affected whether they responded at all and how they responded in terms of the land they considered to be part of their farm.

Wrapping up: With all of this said, what can we conclude about the trend of Oregon’s farmland acreage and land values? On one hand, the direction of the changes reported in the Census is, by all accounts, accurate. We are, and have been, losing farmland and simultaneously seeing its value rise. On the other hand, the substantial changes reported in the most recent Census seem to be driven at least partly by survey design and response rates, rather than actual changes in these two high-level summary statistics. When studying something like farmland over a broad geographic area, it’s impossible to track every change that occurs with 100% accuracy. Instead, analysts rely on different data sources, some of which are based on surveys. There’s always going to be some error in what’s being measured, so it’s important to pay attention to how data are collected and what effect that might have on your findings. Given all this, it’s probably best to consider the massive changes for Oregon revealed in the latest Census to be upper bounds on what actually happened and, in all likelihood, a bit of an exaggeration.

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