This study investigates the economic problem of recent booming farmland values. An income capitalization model is estimated to conduct farmland valuations using state-level data from 1980 to 2011. Explanatory variables include expected market returns, government payments, production risk, urban influence, interest rates, and ethanol production scale. Spatial models are introduced to control for spatial dependencies on farmland values, and multiple tests are conducted to explore the most appropriate model for farmland valuation. Furthermore, the thesis offered suggestions for future researches and to provide a proposal in forecasting future farmland values according to the changes in the determining factors.