Land costs shape where different agricultural activities occur, and bid-rent theory helps explain how distance from markets influences farming intensity, land value, and production choices.

Land Costs and Agricultural Location

Agriculture is deeply influenced by the economic geography of land, especially the variation in land prices across space. Near urban centers, where accessibility is greatest, land values rise sharply because many users compete for limited space. Farther from the market, land becomes cheaper as transportation access declines and fewer economic activities can profitably locate there.
Farmers must therefore balance production costs, potential revenue, and transportation expenses, making land price a determining factor in what types of agriculture can operate in different zones.

Bid-Rent Theory

Bid-rent theory is a geographic model describing how land users are willing to pay different amounts for land depending on distance from the central market. Because some activities profit more from proximity while others can function at a distance, this creates spatial patterns of land use.

The theory assumes a single market center, uniform land quality, and rational decision-making—conditions rarely met exactly in reality but still useful for understanding why farming systems display particular spatial patterns. Between areas of high, medium, and low land cost, agriculture must adjust its strategies to remain profitable.

Bid-rent theory is an economic-geography model that explains how the price and demand for land change as distance from the market or city center increases.

This diagram shows bid-rent curves for different land users, illustrating how willingness to pay for land decreases with distance from the market center. Each downward-sloping curve represents a distinct land-use type, helping explain why intensive uses cluster near the core. The labeled land-use bands at the bottom extend beyond agricultural categories but demonstrate the same economic principle. Source.

How Distance Affects Land Value

Land value typically shows an inverse relationship with distance: the greater the distance from a city's core, the lower the cost of land. This occurs because transportation costs increase with distance, reducing the revenue farmers retain after delivering goods to market.
As a result, only agricultural systems capable of generating enough profit to offset high land prices can locate near the urban center. Less profitable or more land-intensive activities gravitate toward cheaper peripheral regions.

Farming Intensity and Land Costs

Farming intensity refers to how much labor, capital, and technology are applied per unit of land. Land cost is one of the strongest factors pushing farmers toward either intensive agriculture or extensive agriculture.

Intensive Farming Near the Market

High land costs near markets encourage agricultural practices that maximize production per acre. These include:

• Market gardening, which uses high labor and capital inputs to produce perishable fruits and vegetables

• Dairy farming, centered close to consumers due to perishability and high transport costs

• Specialty crops requiring rapid delivery to maintain quality

Such systems apply greater investment in labor, machinery, fertilizers, and greenhouses to extract the maximum possible yield from limited and costly land.

Because intensive methods require significant inputs, they only make economic sense where land prices justify maximizing productivity.

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Extensive agriculture becomes viable only when land is cheap enough that farmers can cultivate or graze across broad spaces without excessive cost.

Intensive agriculture uses high inputs of labor, capital, or technology to produce high yields from a relatively small area of land.

These rice terraces show intensive farming, where steep terrain is reshaped to maximize productivity on limited land. The tight stacking of terraces highlights high labor and capital inputs. The regional context exceeds AP requirements but effectively illustrates land-intensifying strategies. Source.

Extensive Farming in Lower-Cost Zones

Farther from the market center, extensive systems dominate, including:

• Ranching, where livestock roam across wide stretches of land

• Nomadic herding, practiced where land has low economic value and productivity

• Large-scale grain farming, which depends on mechanization rather than high labor inputs

These activities are profitable only where land prices are low, and transportation costs can be managed for goods that are non-perishable or easier to ship long distances.

Extensive agriculture uses lower inputs per unit of land and spreads production over large areas, including ranching, pastoral nomadism, and some grain farming.

This ranching scene illustrates extensive agriculture, with livestock dispersed across a broad landscape and low labor density per unit of land. The wide valley and distant settlement underscore the reliance on cheap, expansive land. Historical details exceed syllabus scope but enhance understanding of extensive land-use patterns. Source.

Bid-Rent Curves and Agricultural Decisions

Bid-rent theory can be represented using a bid-rent curve, which shows how much each land user is willing to pay at different distances from the market. Farmers producing highly perishable goods or those with high market value bid the most for land closest to consumers. As distance increases, the willingness to pay drops sharply.
Different agricultural systems therefore occupy different zones around the market, each optimizing the balance between land cost and transportation expenses.

This formula highlights how transportation expenses directly reduce the amount farmers can allocate to land costs, shaping their feasible location.

Linking Bid-Rent to Farming Intensity

Farming intensity ultimately reflects a strategic response to varying land costs:

• High-cost land → intensive farming with high yields per acre

• Low-cost land → extensive farming using large land areas

• Medium-cost land → mixed systems balancing labor, capital, and transport costs

Because intensive systems generate more revenue per unit of land, they can afford expensive land close to market centers. Extensive systems cannot, so they spread outward into cheaper regions.