Once ownership has been identified, land use has been established, and the productive capability has been tabulated for the parcel, a four-step valuation process begins:
Yield Net Value per Acre x Commodity Unit = Land Value
Determine Prices of Agricultural Product
This information is derived from the Wyoming Agricultural Statistics Service’s commodity price data. This information, which consists of all hay, all wheat and grazing prices, is converted to a five-year weighted average.
Capitalization Rate Selection
This rate is based on the Farm Credit Services of Omaha Long Term Portfolio rates, which are also converted to a five-year weighted average.
Determine Net Income
To determine the net income, the unit price of each of the three commodities is multiplied times the production per acre. Next, the landlord share is determined, if applicable, then the expenses and production losses are deducted to establish a net income to the landlord.
Capitalize Net Income
The final step in the process is capitalizing the net income. The following formula illustrates the valuation process: