Investment Firms May Be Farmers of Tomorrow
The land rush is well established in Montana, but a new report warns that more agricultural land could be lost to outside investors over the next 20 years.
The report, “Down on the Farm,” published last week by the Oakland Institute, details how institutional investors who are looking for safe harbors for large sums of money are looking to agricultural property as farmers retire throughout the U.S.
In 2012, the institute documented the trend of wealthy investment groups — hedge funds, private equity, pension funds and university endowments — making speculative land purchases in international countries. But the effect also extends to U.S. soil.
With the age of the average agricultural producer pushing 60, according to the U.S. Department of Agriculture's National Agriculture Statistics Service, up to 400 million acres are expected to go up for sale over the next two decades. That's half of the nation's farmland.
Meanwhile, an estimated $10 billion in institutional capital is waiting for such land to open up.
Based on information acquired through Freedom of Information Act requests, the report says that some buyers would use the land for industrial farming or fossil-fuel production, including fracking, because they generate substantial income.
The report said accountability and food safety could become an issue when contractors and private money control farms.
As the global population grows, food production is critical. The U.S. leads production, thanks to advanced technology, but that could diminish if more land is taken out of production.
Although the report details specifics occurring in California, the issue isn't limited to the Golden State.
Montana started showing up on the radar of the rich in the ‘80s, but investors seem to have multiplied in the past decade.
Some of the more high-profile landowners include Texas billionaires Farris and Dan Wilks, who had bought up more than 430 square miles in seven Montana counties by 2012, almost double the holdings of Ted Turner's Montana ranches.
That year, Wal-Mart billionaire Stanley Kroenke bought the 124,000-acre Broken O Ranch near Augusta for close to $132 million to add to his two other Montana properties.
Last month, the Billings Gazette reported that a Boston-area buyer purchased three Shields River Valley properties totaling 39 square miles that had been listed at up to $40 million.
The report focuses on institutional purchases. Private and institutional buyers are part-and-parcel of the trend that takes agricultural land and thus crop production out of local control.
In Iowa, high corn prices are driving land purchases, but so far in Montana, it's driven mostly by subdivision development and vacation homes.
“We know people are buying huge chucks of land in Montana,” said Montana Farm Bureau spokesman John Youngberg. “In my opinion, with the volatility of the stock market, these guys are looking for places to park money, and real estate is relatively safe. Our concern is what happens to the land when it's not such a good investment?”
Last week, the NASS released preliminary census data showing that Montana land in production had decreased by 1.6 million acres since 2007 to 59.7 million. However that's a million acres more than in 1997 so loss of production is not much of a factor yet.
Montana Department of Agriculture spokesman Jayson O'Neill said some rich buyers might develop the land, but others either lease land to farmers or keep the land under production using local ranch managers.
The state offers a tax write-off for agricultural production so some keep the crops growing until they're ready to develop in some other way.
Meanwhile, they drive up land prices and have the advantage of not having to depend on agriculture for their livelihood, Youngberg said.
The upcoming generation often can't afford to continue farming after rich out-of-state buyers drive land prices up, along with associated property and inheritance taxes, Youngberg said.
New farmers with no farming history have little opportunity to buy land of their own, said Annie Heuscher of the Community Food Agriculture Coalition.
The report offers a number of strategies for keeping such farmers on the land and keeping land out of investment buyers, including tax incentives, alternative property financing and connecting budding farmers with farm owners.
Heuscher said Montana Land Link is helping to do that but it's an uphill battle against investors with deep pockets.
“It's a huge burden in Montana and around the nation. In Pennsylvania, they're now telling farmers to just lease the land instead of looking to buy,” Heuscher said. “Farmers are getting older and all of that land is going to transfer. That can be a real opportunity for young farmers. But it's obviously also a threat.”
The Oakland Institute, established by human rights advocate Anuradha Mittal, is an independent think tank that researches policy related to worldwide food issues.