© Reuters. FILE PHOTO: A cornfield on the Hodgen Farm In Roachdale, Indiana, U.S. October 29, 2019. REUTERS/Bryan Woolston/File Picture
By Leah Douglas
(Reuters) – Funding funds have grow to be voracious patrons of U.S. farmland, amassing over one million acres as they search a hedge towards inflation and purpose to profit from the rising international demand for meals, based on information reviewed by Reuters and interviews with fund executives.
The development worries some U.S. lawmakers who worry company curiosity will make agricultural land unaffordable for the subsequent era of farmers. These lawmakers are floating a invoice in Congress that might impose restrictions on the business’s purchases.
Although their acreage is a small slice of the almost 900 million acres of U.S. farmland, the tempo of acquisitions by funding companies like Manulife Funding Administration and Nuveen has quickened because the 2008 international monetary disaster drove companies to hunt new funding autos, based on Reuters interviews with fund managers and an evaluation of information from the Nationwide Council of Actual Property Funding Fiduciaries (NCREIF).
The variety of properties owned by such companies elevated 231% between 2008 and the second quarter of 2023, and the worth of these holdings rose greater than 800% to round $16.2 billion, based on NCREIF’s quarterly farmland index, which tracks the holdings of the seven largest companies in farmland funding.
Farmland (NYSE:) gives regular returns even in durations of excessive inflation, and companies hope crop demand will stay regular because the United Nations predicts the world will want 60% extra meals by 2050 attributable to inhabitants progress.
Funding agency acquisitions are additionally outpacing farmland purchases by international entities, based on information from the U.S. Division of Agriculture (USDA).
Lawmakers debated this 12 months whether or not to curtail international farmland possession, involved that adversaries may purchase land to exert political affect. The Senate included a provision to ban farmland purchases by China, Russia, Iran, and North Korea in its model of the Nationwide Protection Authorization Act, which has but to be reconciled with the Home model.
The variety of acres owned by international entities elevated 64% to about 40.8 million acres between 2010 and 2021, with the worth doubling to about $72.5 billion, based on the newest USDA information obtainable.
NCREIF doesn’t report the acreage owned by funding companies, however a Reuters overview of firm web sites, sustainability stories, annual stories, federal filings and interviews with executives from six of the seven corporations who report back to the index discovered that collectively, they personal about 1.65 million acres.
Paul Schadegg, vice chairman of actual property operations at Farmers Nationwide Firm, a farm administration agency, stated that when traders enter the farmland market it could possibly push up the value of the land.
“What they’ve done is establish a new floor,” he stated.
With the typical age of farmers on the rise, excessive land prices are a hurdle for younger and starting farmers, stated Tim Gibbons, communications director with the Missouri Rural Disaster Middle, an advocacy group.
“If the next generation isn’t enticed to come back to the farm,” he stated, “then who’s going to own that land?”
The typical value of an acre of cropland reached a report $5,460 in 2023, based on USDA, up from $2,700 in 2010, pushed by excessive commodity costs and robust demand, amongst different components.
About 60% of U.S. farmland is farmer-owned and -operated, with the remainder owned by non-farmer operators together with people, trusts, and firms, based on USDA.
“IT’S LIKE GOLD”
Funding companies say they purchase farmland as a result of it’s resilient to inflation, gives secure returns via land leases and has restricted draw back danger, options that grew to become extra enticing after the 2008 monetary crash pushed traders to construct diversified portfolios.
“It’s a hard asset. It’s like gold. It’s not going anywhere,” stated David Gladstone, CEO of Gladstone Land (NASDAQ:), an actual property funding belief which owns 116,000 acres of farmland, largely rising blueberries, strawberries, almonds, and different produce, throughout 15 states at a worth of $1.6 billion.
The NCREIF farmland index has averaged an 11.4% annual return over the previous 25 years, in comparison with 9.3% for the , based on an August Gladstone investor presentation.
Farmland additionally gives progress potential because the demand for meals rises globally, stated the web sites of Manulife, which owns 284,413 U.S. farm acres at a worth of $3.3 billion based on its 2022 agricultural investments report, and Nuveen, which owns 751,000 U.S. farm acres at a worth of $6.6 billion based on its 2023 sustainability report.
Each companies declined interview requests.
Policymakers are contemplating stricter tips on who should buy farmland for the subsequent iteration of the five-year farm invoice, which Congress was meant to go this 12 months however which can probably be pushed to subsequent 12 months attributable to Congressional gridlock.
A invoice launched in July by Senator Cory Booker, a member of the Senate Agriculture Committee, and endorsed by 70 farm and rural teams, would curtail funding fund purchases and leases of farmland and ban giant company traders from utilizing USDA farm applications.
Federal applications like crop insurance coverage and commodity subsidies can add to the enchantment of investing in farmland as a result of they curb danger, stated Bruce Sherrick, director of the TIAA Middle for Farmland Analysis on the College of Illinois.
