Secretary of Agriculture Tom Vilsack has been minimizing concerns that the existing level of foreign ownership of American farmland is a serious risk, saying the bigger issue is farmland being scooped up by “billionaires and Wall Street.”
“Do you know that roughly a third of all the farming operations that generate more than $500,000 in sales are owned by investment outfits?” Vilsack told the North American Agricultural Journalists group at its annual meeting in Washington in April.
The fact is both foreign ownership of farm and timber land, when combined with land owned by investment funds or wealthy individuals, represents a small share of the nearly 900 million acres of agricultural land in the country.
Institutional investment companies (such as Nuveen, ManuLife Investment Management and AgriVest) hold about 2% of U.S. farmland. Foreign investment in U.S. farms and forests accounts for 3.4% of the country’s agricultural land total, according to USDA.
While Vilsack draws a distinction between institutional investment and foreign ownership, the CEO of a farmland acquisition and management company and an Illinois economist argue that investment in U.S. farmland increases capital available in the sector and provides liquidity for the market.
“I always say that a farmer doesn’t like an investor unless it’s their own investor,” says Steve Bruere, CEO of Peoples Company, a 50-year-old Iowa-based farm management and auction company. “It’s not practical on the scale at which many farms are operating that they will own all the land they farm.”
Peoples Company brokers about $1 billion in farmland sales annually, managing land in 24 states. The company frequently plays matchmaker, seeking property for individuals who want to own farmland and then securing a farmer who will rent it. The buyer may not be local, so Peoples Company can continue to manage the farm on behalf of the investor.
Steve Bruere“About 60% of Iowa farmland today is owned by absentee landlords,” says Bruere. “And there will be more absentee ownership in the future than today.” Many of the absentee landlords are retired farmers or family heirs.
Bruere says he believes the most recent wave of concern about who owns farmland — whether by foreign interests or institutional investors — was spurred by several news events. One was the disclosure that Microsoft founder Bill Gates owns 270,000 acres of farmland in numerous states.
The second series of news stories involved China — the wayward spy balloon that crossed much of the United States in February 2023, as well as two different Chinese entities that had purchased or were trying to purchase land near U.S. military bases.
The idea that a U.S. investor or investment company somehow shouldn’t be allowed to own farmland doesn’t make sense in this country, and certainly doesn’t make economic sense, according to Bruce Sherrick, Fruin Professor of Farmland Economics and director of the TIAA Center for Farmland Research at the University of Illinois, Champaign-Urbana.
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“This is like telling someone that you can sell your house to the highest bidder unless I don’t like them,” says Sherrick. “The efficiency of the market has to be considered as well.” The buyer who bids the most for a parcel generally has the lowest cost of capital, which generates a higher return and, in theory, contributes to keeping the cost of food down.
Bruce Sherrick“What happens when Bill Gates buys a big farm?” asks Sherrick. “He may put in tiling, plus if it needs road improvements, he does that, then he rents it to the best local farmer and likely allows a local farmer to improve their scale of operation”
The bottom line is that 80% of farms for sale are sold to neighbors, according to Sherrick. And 90% of corporate farms are family farms.
Institutional investment in farmland, in addition to helping local farmers farm more land, also helps regular investors, not just billionaires, he says.
“I’m not a billionaire, I’m a teacher,” says Sherrick. “My retirement savings through the university with TIAA is a fund that invests in farmland, among other things. I’m happy that one of the assets invested in is farmland.”
Since the global financial crisis in 2008, the amount of farmland owned by institutional investors has grown more than 231%, according to National Council of Real Estate Investment Fiduciaries (NCREIF). The value of farmland held by investment groups has more than doubled over the past three years. It was $16.6 billion at the end of 2023, up from $7.4 billion at the end of 2020.
Historically, farmland has been less volatile than many other assets. When the economy tanked 16 years ago, the average value of farmland only dipped 3.2%, according to USDA. Meanwhile, the Dow Jones stock market index declined 54% from its high in the fall of 2007 to early 2009.
Farmland also gained value in 2022 in the wake of the Covid pandemic, rising inflation and Russia's invasion of Ukraine. The average annual return on farmland has been more than 10.5% since 1991. Generally reliable, if not spectacular, returns have made farmland increasingly attractive.
The value of farmland in the U.S. and the size of the market here also make that asset attractive to those outside the U.S.
Last October, the attorney general of Arkansas ordered Northrup King Seed Co. to divest 160 acres the company has owned since 1988. Northrup King is owned by Syngenta, which in turn is owned by China National Chemical Co., known as ChemChina.
The enforcement action is believed to be the first under a wave of new laws (10 states in the past year alone), many of which specifically target investments from China, Iran, North Korea and Russia. A number of the laws come in the wake of highly publicized cases in Texas and North Dakota, where Chinese businesses purchased land near U.S. military bases.
Vilsack says laws like the one in Arkansas are more about appearances than actual threats.
“I understand the emotion of this, and I understand the politics of it. And that's what this is,” he said. “I don’t know that there’s a whole lot of concern about Canada or Canadians purchasing farms here.”
The United States should be concerned about China or Chinese companies buying land near Department of Defense installations, Vilsack said. This was the case in North Dakota in 2021, where a Chinese-owned company attempted to buy 300 acres for a grain milling plant.
In Texas, a Chinese billionaire with ties to the Chinese Communist Party, Sun Guangxin, owned nearly 140,000 acres intended for a wind farm and other ventures, which he bought beginning in 2016. Guangxin and Smithfield Foods, a subsidiary of China's WH Group, own 80% of Chinese-owned land in the United States.
While national security is vital, says Vilsack, blanket bans on land ownership by foreigners from certain countries do not go unnoticed by those governments and could create problems.
“Why do I know that?” asks Vilsack. “Because the Chinese ministers sitting across from me … one of the first questions they asked is about some agenda [of ours] and the Arkansas law,” he says. “When they bring it up it is a signal.”
Vilsack noted that in the first quarter of fiscal year 2024 (beginning Oct. 1), trade with China was down $6 billion from the previous year. “If you rap on your number-one customer, it is going to have an impact,” he said.
The Agriculture Foreign Investment Disclosure Act (AFIDA), enacted in 1978, requires USDA publish a report annually on foreign agricultural land ownership. The latest report, accounting for foreign land ownership through 2022, says foreign investors held an interest in more than 43.4 million acres. This was an increase of more than 3.4 million acres from the previous year. You can read the AFIDA reports at: https://www.fsa.usda.gov/programs-and-services/economic-and-policy-analysis/afida/index.
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