The Van Trump Report

Institutional Buyers Continue to Gobble Up US Farmland

Farmland is one of the best asset classes around, outperforming most other major assets over the past three decades. That trend is only expected to accelerate as farmland steadily becomes more scarce even as global food demand continues to rise. This has not gone unnoticed by investors, which have been adding farmland to their portfolios at a record pace. According to the National Council of Real Estate Investment Fiduciaries (NCREIF), the value of farmland held by investment groups has more than doubled since 2020.

NCREIF, which tracks the holdings of the seven largest firms in farmland investment, reports the value of farmland held by funds at $16.6 billion as of the end of 2023, versus $7.4 billion at the end of 2020 and just $1.8 billion in 2008. That comes as cropland values have swelled as well. According to the USDA, the average per acre value of US cropland in 2023 was $5,420, up from $4,100 per acre in 2020 and $2,760 in 2008.

Noticeably, the pace of institutional investment in farmland has accelerated since the 2008 financial crisis. This is partially due to firms seeking to protect their portfolios against downturns in other asset groups. But farmland proved its value even further in 2022 when stocks and bonds fell by double digits and even other real estate took a hit. Cropland values, by contrast, climbed more than +14% in 2022.

Not surprisingly, this outperformance drew even more attention from investors. The number of properties owned by investment firms increased +231% between 2008 and the second quarter of 2023, according to NCREIF. NCREIF does not report the acreage owned by investment firms, but a Reuters review of company websites, sustainability reports, annual reports, federal filings and interviews with executives from six of the seven companies who report to the index found that together, they own about 1.65 million acres.

Even with the acceleration in buying, investment funds are estimated to own only a small percentage. Most peg it at around 1%-3% of US cropland, though some claim the share of prime ag land owned by investors is well above 10% in some areas. Additionally, the USDA estimates as much as a third of US farmland is owned by non-farmers.

Farmers and lawmakers alike have raised alarms about institutions gobbling up America’s farmland. It’s of particular concern when factoring the amount of land expected to change hands over the next decade as increasing numbers of US farmers retire. “There’s significant concern that these companies are going to be in control of the agricultural land base in this country,” Jordan Treakle from the National Family Farm Coalition told Financial Times.

At a local level, there are worries about how institutional ownership of so much farmland will impact rural communities. Many already point to the precipitous rise in land prices the past three years as one consequence, which they say is pricing out a new generation of would-be farmer. Institutional investors claim prices are being driven more by outside influences such as the war in Ukraine, higher commodity prices, and the overarching need to produce more food as populations rise.  

While the loudest noise being made in Congress has revolved around foreign ownership of farmland, there have been some efforts to curtail investment fund and corporate purchases, as well. Several ag groups, including the National Family Farm Coalition, are calling for passage of the “Farmland for Farmers Act,” which would restrict the amount of farmland large corporations can own. Introduced in July 2023, the bill has yet to make its way out of committee. (Sources: Financial Times, Reuters, USDA, American Farm Bureau)

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