“We’re used to thinking of escalating rents as an urban problem, something suffered mostly by the citizens of booming cities. So when city people look out over a farm—whether they see corn stalks, or long rows of fruit bushes, or cattle herds roving across wild grasses—the price of real estate is probably the last thing that’s going to come to mind. But the soil under farmers’ feet has become much more valuable in the past decade. While urban commercial real estate has skyrocketed in places like New York, San Francisco, and Washington, D.C., powerful investors have also sought to turn a profit by investing in the most valuable rural real estate: farmland. It’s a trend that’s driving up costs up for the people who grow our food, and—slowly—it’s started to change the economics of American agriculture.
Think of it this way: If you wanted to buy Iowa farmland in 1970, the average going price was $419 per acre, according to the Iowa State University Farmland Value Survey. By 2016, the price per acre was $7,183—a drop from the 2013 peak of $8,716, but still a colossal increase of 1,600 percent. For comparison, in the same period, the Dow Jones Industrial Average rose less than half as fast, from $2,633 to $21,476. Farmland, the Economist announced in 2014, had outperformed most asset classes for the previous 20 years, delivering average U.S. returns of 12 percent a year with low volatility.
Today, USDA estimates that at least 30 percent of American farmland is owned by non-operators who lease it out to farmers.”
Thus starts an analysis of what is happening to the very farmland that grow the crops that America depends on. It is a rather sobering analysis of farmers getting on in years and corporations looking for a place to park money that seems to be relatively safe. As the old saying goes that I used to hear over and over as a youngster: “They aren’t making any more land.”
The writer, Katy Keiffer, then analyzes in depth the changes that have been and will continue to take place on farms and in farming communities. As the price gets higher and the current crop of farmers gets older there is a turnover from the independent farmer-owner of yesteryear to the corporate owned farms leased back to farmers of today.
Keiffer skirts a particular problem that has been a question in many minds for a long time – could a small number of investor-owners control the food supply?
She does, however, look into the question of whether inverter-owners who are not operators will be as responsible for the land as farmer-owners.
Chief among them: The investment entities that own the land can control what’s grown on it and how. A quick look at farmland investment company websites makes it clear that they are very particular about assessing the fertility, the access to water and distribution, and other criteria of the land they are buying. And they favor conventional agriculture—the kind that uses the agro-chemicals, mono-cropping, and extensive tilling that continue to degrade American farmland. For financial investors, commodity crops are king, and it’s hard to imagine that they will change their minds anytime soon. As Don Buckloh of the American Farmland Trust put it, “When it comes to crop diversification it is nearly impossible to shift a commodity operation to something less monolithic. For example, the infrastructure for dealing with products other than corn or soy in Iowa, simply doesn’t exist. So farmers are stuck with having to grow the same crops ad infinitum. It’s a scary proposition because should the ethanol program be dissolved, what will corn farmers do with all that extra corn? Already the prices are so low that farm incomes are projected to be half what they were six or seven years ago. We have no plan B for this type of eventuality.”
One other question she delves into is that of foreign ownership of American farmland. She notes that croplands in other countries have been bought by large corporations in the past, often to grow specific crops such as palms for palm oil. Will United States farmland be bought up by foreign owners in such a manner?
A good article to bring out some thought on Iowa’s biggest single resource – it’s fertile farmland.