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Sharecropping 2.0

Institutional investors eyeing US farmland. Beginning farmers often priced out.

There’s a global land rush underway. While human population continues to grow, the amount of arable farmland on the planet is essentially a fixed resource, and in recent years worries about long-term food security have spurred a drive to snatch up agricultural lands. Enterprising journalists and watchdog groups have revealed the ways in which poor farmers, often in Africa, are losing their land to big investment companies and giant agribusiness outfits that want to turn small landholdings into export-oriented plantations to grow food for wealthier nations. Here’s how reporter Andrew Rice explained the situation in an article published in The New York Times Magazine in 2009: “A variety of factors – some transitory, like the spike in food prices, and others intractable, like global population growth and water scarcity – have created a market for farmland, as rich but resource-deprived nations in the Middle East, Asia and elsewhere seek to outsource their food production to places where fields are cheap and abundant.”

Farmlandsphoto by Storm Crypt, on FlickrWho owns the land really determines how the land is used or misused,” says Anurdha Mittal,
executive director of The Oakland Institute.

It now appears as if a somewhat similar land rush, driven in part by massive investment firms, is occurring here in the United States.

According to a new report by The Oakland Institute, an environmental and social justice think tank, institutional investors are buying up US agricultural properties at an increasing pace. “Today, enthusiasm for agriculture borders on speculative mania,” the report warns. “Driven by everything from rising food prices to a growing demand for biofuel, the financial sector is taking an interest in farmland as never before.”

While only about 1 percent of US ag land is currently held by private equity, the report says an estimated $10 billion in institutional capital is looking for access to US farmland.

Unlike the situation in Africa, big investors aren’t interested in US ag land because it’s cheap – but rather because it’s valuable, and therefore a seemingly good investment. In recent years, US farmland prices experienced a huge jump. In 2012 alone, agricultural real estate values in some parts the country went up by more than 30 percent, prompting some people to worry of a price bubble in ag lands similar to the one that brought down the housing market. Sustained high prices for commodities like corn and soy is driving the steady increase in farmland values. The high commodity prices have been fueled by a number of factors – from increasing demand in East Asia, to the poor crop yields due to the 2012 drought, to federal biofuel and ethanol mandates.

Why does it matter that hedge funds and investment firms are gobbling up US ag lands? Two reasons, sustainable agriculture advocates say. First, absentee landlords, motivated primarily by investment returns, are less likely to be mindful stewards of the land. And second, the continued inflation in land prices is a major obstacle to the success of a new generation of farmers.

“I think the biggest worry is that who owns the land really determines how the land is used or misused,” says Anurdha Mittal, executive director of The Oakland Institute. “Given the crisis we face – when you look at climate change and the loss of topsoils – the prospect of these absentee landlords who look at lands as a commodity is frightening. They [institutional investors] look at this as an export model of agriculture. A lot of these investors are more interested in the rising economies [of East Asia]. They will grow pistachios or almonds for export, not food for consumption here in the US.”

Mittal uses a sweatshop metaphor to explain the risks of absentee ag land ownership. Just as giant retail brands that outsource the actual clothes-making can avoid responsibility for the conditions in overseas textile factories, so too can investment firms that lease lands ag lands turn a blind eye to how those properties are managed. “Think of GAP making clothese in Bangladesh – they are no longer responsible when there are fires or buildings collapse,” Mittal say. “With absentee landlords, operations are passed onto second or third parties. Who’s responsible? Who’s accountable? Those are huge issues.”

Bob Wagner, a senior policy advisor for American Farmland Trust, echoes this concern. “You always treat things that you own better, rather than things that you are using on a temporary basis,” Wagner says. “If you are so distant from the ownership, if it’s just a line on your balance sheet, are you going to be concerned about the use of the land, about soil and water conservation practices?”

Wagner’s take reminds me of the old quip about how no one, in the history of the world, has ever washed a rental car. Or, put another way: When agricultural lands are owned by far-off investment firms instead of local families, a farm becomes just another investment property and stops being the home-place. Inevitably, an ethic of stewardship and care will be lost.

Wagner also cautions that if more investment capital takes a keen interest in ag properties, it will make it even more difficult for young and beginning farmers to access land. The average age of the American farmer is 58. A 2011 study by the USDA’s Economic Research Service found that 30 percent of farmers were 65 or older, meaning that in the next decade the country will experience of wave of farmer retirements. Anecdotal evidence (you’ve seen all of those profiles of hot, young farmers, right?) as well as government statistics reveal an uptick in the number of young and beginning farmers. But those aspiring farmers are having a hard time fulfilling their dreams because ag land is increasingly unaffordable.

Land access is a problem nationwide, Wagner says. “This is a challenge when it comes to new and beginning farmers, because they are having a problem accessing land. They don’t have the capital to take out loans or purchase those properties. And the price of the farmland is pretty high, whether because of [housing] development pressure, or competition from existing farmers, or competition from hedge funds.”

Wagner then told me: “Having land owned by the people who farm it is always the best scenario.”

Jason MarkJason Mark photo
Jason Mark is the Editor in Chief of SIERRA, the national magazine of the Sierra Club, and the author of Satellites in the High Country: Searching for the Wild in the Age of Man. From 2007 to 2015 he was the Editor of Earth Island Journal.

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