An analysis of farmland sales in the Midwest and Plains states found foreign investors paid 13.7% more than American purchasers for comparable tracts, but the infrequent transactions did not affect land values overall, said Mykel Taylor, an associate professor of agricultural economics at Auburn University, on Tuesday. Foreign ownership is “pretty hot politically” as an issue, she said, and could result in the USDA becoming part of the powerful federal committee that decides if a foreign purchase poses a national security risk.
Among the proposals in Congress to tighten U.S. oversight of land ownership or to ban sales to nations such as China and Russia, “the one that I think might get woven in [the farm bill], because I think a lot of people agree about it, is putting the secretary of Agriculture on CFIUS, which is the Committee on Foreign Investment in the United States,” Taylor said.
Some 37.6 million acres, or 2.9%, of agricultural land in the country is owned by foreign entities, with Canadian citizens and companies holding 12.8 million acres. China is 18th on the list of foreign ownership, between Sweden and Spain, with interests — ownership or long-term leases — on nearly 384,000 acres. “So for all the press that China has gotten, it is not a major holder of U.S. ag land,” said Taylor.
Rising tensions between the United States and China have put a spotlight on the purchases. In February, the U.S. Air Force shot down a proposal by a Chinese company to build a corn milling plant in Grand Forks, North Dakota. The Air Force said the plant would be too close to a hub for its air and space operations.
Speaking at a Chicago Federal Reserve Bank conference, Taylor said she and Wendong Zhang of Cornell gauged the impact of foreign purchases on the price of farmland in 11 states in the Midwest and Plains by looking at sales reported from 2015-2020. “We tried to match (foreign purchases) to comparable domestic sales in terms of size and location and cropland mix,” she said. Foreign purchasers paid an average $6,536 an acre, compared to $5,745 an acre by domestic buyers.
“So does this mean that they are driving the overall land market? No,” said Taylor. “This just means that for the individual parcels that they are buying when they participate in the market, they are paying a slight premium.” Americans are the buyers in the vast majority of sales. Many of the foreign buyers appeared to be interested in the solar or wind potential of their new property, based on the business names reported to the USDA. The top states for foreign purchases in recent years were Oklahoma, Texas, Colorado, and Kansas; the leading states for wind power are Texas, Oklahoma and Kansas.
At a Senate hearing in September, David Ortega of Michigan State University said, “There is no clear evidence that foreign ownership is causing U.S. farmland prices to rise.”
Also speaking at the Chicago conference, Zhang said it was too early to tell if the carbon credit and soil health market would influence land values. There was little impact from solar or wind power potential, he said, but farmland with access to high-speed internet service generally had higher value than land with poorer service.
By far, farmers are the dominant buyers when land comes on the market, said Rabail Chandio, of Iowa State University, who cited data from ISU’s long-running annual survey of farmland values. “I would like to argue farmers are still in the game,” she said. Nonetheless, farmers and ranchers often name nonfarm investors as the leading reason for rising land values.