As House focuses on China, farm groups see other land buyers
Legislators aiming to block China from acquiring US farmland overlook the damaging role of pension funds like TIAA
Roll Call | 5 August 2021
As House focuses on China, farm groups see other land buyers
By Ellyn Ferguson
House appropriators took a bipartisan tough-on-China stance in the fiscal 2022 Agriculture spending bill with language to block acquisition of U.S. farmland and ranchland by companies partly or fully controlled by the Chinese government.
The House passed the Agriculture Appropriations bill on July 29 as part of a seven-bill package.
But some groups that follow trends in agricultural land ownership and use say lawmakers overlooked other trends such as purchases by pension funds, corporations and wealthy individuals that could lock up land, making it difficult for new farmers to enter the industry or small farmers to expand.
Jordan Treakle, national programs and policy coordinator for the National Family Farm Coalition, said his organization has been tracking investments by pension funds such as the Teachers Insurance and Annuity Association of America (TIAA) in agricultural lands. Treakle said there is a global trend of retirement funds adding farmland to their portfolios to hedge against holdings in more volatile stock markets.
“One of the key elements that we’ve seen in the U.S. context specifically is the role of pension funds investing in land as one important player of this broader category of corporate actors,” Treakle said.
TIAA — through its investment manager, Nuveen — stands out because of the scope of its agricultural investments in the U.S. and Brazil, he said. The fund, which has $1.7 trillion in assets, also has holdings in Australia, Chile, New Zealand, Poland and Romania.
“Because they’re a U.S. corporation, they are not being included in this appropriations discussion around threats of Chinese government investing in land in the U.S. lands,” he said. “We think there needs to be a broader conversation about corporate capture of land resources in the U.S. and abroad.”
“We need to look at ways to secure local control and diversify land holdings in this country,” Treakle said.
TIAA is not the only retirement fund that finds farmland attractive. The Washington State Investment Board, which manages money for that state's public employees, includes agricultural land along with mining and minerals, energy and "society essentials" in its tangible assets portfolio that constitutes 5 to 7 percent of its $176 billion in investments.
“All of the TA [tangible assets] investments have different return characteristics, but generally the goal is to achieve both income and appreciation over a long horizon. Our selected agriculture investments fit with this objective,” Chris Philips, the investment board’s director of institutional relations and public affairs, said by email.
David Haight, programs vice president for the American Farmland Trust, said several trends heighten concerns about major changes in farmland ownership. About 40 percent of agricultural land is owned by people 65 or older, and 370 million acres will likely change hands over the next 20 years, Haight said. Real estate developers are likely to be prime competitors for any land sold to nonfamily members.
Haight said research by the trust, a nonprofit organization that works on agricultural land issues, shows 11 million acres were used for real estate development between 2001 and 2016. He said the land is often among the most fertile.
“For a farmer that wants to get started farming near a city, you’re competing with other farmers for the land, but often you’re competing with real estate developers. That’s an important part of the landscape conversation that doesn’t get the degree of attention that it deserves,” he said.
Nuveen said TIAA’s agricultural land holdings are typically an investment for years. The company said it is managing a combined 2.3 million acres in the United States and six other countries. The U.S. accounted for 14 percent, or 336,603 acres, as of December 2020.
Nuveen disputed critics who say big institutional buyers are responsible for higher land values that make it difficult for beginning farmers to buy land or established producers to expand their operations. It cited a 2019 report by Westchester Group Investment Management, a Nuveen and TIAA company that looked at land value trends in Illinois and Iowa, which bars corporate ownership of farmland.
The report says there isn't much difference in value appreciation of farmland in the two states and the values reflect the effects of interest rates and a farm’s potential for operational cash flow. While the majority of farmland remains in family hands, the report also says that institutional investment in agricultural land is likely to increase.
House focus on China
China, the subject of the House Agriculture Appropriations provision, is a relatively small owner of farmland. The Farm Service Agency, which collects data under a 1978 law, said 81 investors from China held 191,652 acres in 2019. That's less than is owned by nationals from Canada, the Netherlands, Italy, Germany and the United Kingdom, who combined own 22 million acres.
The FSA's most recent report shows that 35.2 million acres, or 2.7 percent of all privately held forestland and farmland, had foreign owners in 2019. The law requires a foreign person who acquires, disposes of or holds an interest in U.S. agricultural land to report transactions and holdings to the Agriculture Department. Failure to provide the information could result in a civil penalty of up to 25 percent of the land’s fair market value, but critics say there is little review of the self-reported information.
The House Appropriations Committee's focus on China was itself controversial. Rep. Dan Newhouse, R-Wash., on June 30 proposed an amendment that would direct the USDA to block agricultural land purchases by companies partly or fully owned by the People’s Republic of China. The department also is to deny subsidies or benefits to land held by Chinese government-owned companies.
Newhouse cited national security concerns about entities tied to geopolitical rival China potentially controlling a share of U.S. food production.
Rep. Grace Meng, D-N.Y., raised concerns about feeding discrimination and violence against Asian Americans and Pacific Islanders. The committee revised the amendment and then adopted it, a reflection of bipartisan wariness of China.
Even if the amendment is part of the final fiscal 2022 spending law, it may be more of a message than have meaningful results. The USDA says it doesn't have authority to intervene in private land deals, but it can deny program benefits to some landowners if they aren't citizens or lawful residents.
“USDA’s Farm Service Agency (FSA) does not have the authority to intervene in land sales to foreign persons or foreign owned entities,” a department spokesperson said by email.
Under the Conservation Reserve Program and the major farm programs, the Agriculture Risk Coverage and the Price Loss Coverage, foreign owners or partners must meet certain thresholds for contribution of active labor, capital or land to qualify for subsidies.
Francine Miller, senior staff attorney and an adjunct faculty member at the Vermont Law School’s Center for Agriculture and Food Systems, said she hasn't found any legal authority for the federal government to intervene in land transactions unless there is a clear national security concern.
Miller, who works with the National Family Farm Coalition on land issues, said the Constitution gives states the authority to oversee land transactions. She said it is difficult to get a true feel at the federal level for how much agricultural land is owned by non-U.S. corporations or citizens.
Cris Coffin, national agricultural land network director at American Farmland Trust, is interested in broader information on agricultural land ownership. Coffin said there appears to be a trend of nonfarmers and investors buying farmland, but she said tracking such ownership patterns is difficult because key information from the Agriculture Department is outdated.
Coffin said the last USDA survey of agricultural landlords, including farmer and rancher owners as well as nonfarmers, was done in 2014 and covered 25 states.
“We’re operating a little in the dark on the other 25 states,” Coffin said recently. “We believe there needs to be more regular investment in tracking those ownership patterns."
Coffin also said there appears to be a trend of more land going into the hands of nonfarmers and investors, and regular reporting by the Agriculture Department would provide more information. Congress and the Agriculture Department should make such surveys a higher priority, she added.
The American Farmland Trust also says Congress should use the tax code to give landowners incentives such as capital gains tax breaks on the sale of agricultural conservation easements for permanently relinquishing development rights and for sales to beginning, military veteran and socially disadvantaged farmers who usually don’t have family land or the finances to compete with investors and developers.
The goal is to provide more opportunities for the next generation of farmers and ranchers to acquire land.
“Most of the farmland that transfers in this country goes through estates. Very little land transfers on the open market,” Coffin said.
Post a comment