Here's Why Foreign Investors Are Trying to Buy American Farmland12/02/2014 23:09
The news from the Department of Agriculture this week wasn't good. The USDA's dour projections suggest that, after a record five-year boom in crop prices, that bubble is set to burst, potentially decreasing annual farm profits by 27 percent nationally. While price fluctuations are nothing new in agriculture—there is a reason why farm subsidies exist, after all—this latest boom-and-soon-to-bust cycle in the commodity market could have a lasting impact on American agriculture. That's because wealthy international investors and corporations are buying up much of America’s usable land at astronomical prices per acre, turning the farmers into their tenants or repurposing the land altogether.
Come the next boom cycle, it may be overseas interests that reap the cash rewards.
“Farmland has now become the latest scarce ‘hot’ commodity for all sorts of speculators who have absolutely no interest in agriculture,” said John Peck, executive director of Wisconsin-based Family Farm Defenders.
“No local farmer can compete with $7,000 an acre," he said, citing the going price foreign investors are willing to pay for America's heartland.
Last year, The New York Times reported that record high prices for commodity crops such as corn and soybeans were driving up auction prices for farmland, where acreage is being bought at a crazy clip by farmers and investors, some from overseas. Current values are around four times higher than the peak per-acre price reached during the bubble in the 1970s and '80s that preceded the farm crisis. Fourth-generation Kansas farmer David Taylor, 59, told the newspaper he sold his 176-acre soy farm for more than $10,000 per acre after realizing that his children were not going to become farmers.
“I bawled like a baby,” he told the Times.
When you consider farming's demographics problem, it becomes clear that Taylor isn't the only last-generation farmer looking for a buyer. The lion’s share of farmers is going gray—nationally, the average age is 55—and fewer young people are getting into the business. So when someone comes along and bids a small fortune for a plot of family land, it's a hard offer to turn down. As such, the recent spike in commodity prices has presented many farmers with the opportunity to cash out big by selling their land. But with the crop-price bubble expected to burst this year, the future, less bullish agriculture industry will be defined by a different landscape of American land ownership.