Agricultural conservation easements and on-farm investment

Abstract

Land represents the largest asset for farmers to use in securing collateral-based loans. Traditional lending appraisals may or may not take into account the capitalized future development value of the land, particularly in securing operating notes. Conservation easements may offer an alternative to obtaining financial capital while maintaining the agricultural use of the property and retaining access to operating notes through traditional lending channels. We assemble a national panel dataset to measure the relationship between conservation easement enrollment and on-farm investment with the goal of answering the question: 'Do conservation easements result in subsequent reinvestment in agricultural operations, and if so, what types of agricultural reinvestment occur?' The results of our study indicate that conservation easements may allow smaller farming operations to persist using a less capitally intensive structure under areas of urban influence. The study contributes to policies regarding the utilization of capital liquidity generated by conservation easements as well as the effectiveness of conservation easements in increasing credit access to smaller farmers. Moreover, our study suggests that agricultural conservation easements may lower barriers to entry in securing farm ownership through both lowering overhead costs in addition to a reduction in the market value of the property.