Booker seeks investment restrictions to balance farmland consolidation

When farmland acquisitions by Chinese investors brought public attention to disclosure regulations governing foreign investment in US farmland late last year, it was clear the resulting debate was unlikely to remain focused on national security. The months since have seen a steady drumbeat of local and national concern about murky farmland ownership against a backdrop of the Biden Administration antitrust enforcement that has included efforts focused on private equity and meat and poultry supply chains, among other sectors.

Increased attention on land markets’ opacity has culminated in legislation proposed last week to counteract consolidation through Federal restrictions on agricultural purchases and leases by corporations, pensions and investment funds. Regardless of its ultimate success or failure, Senator Cory Booker’s Farmland for Farmers Act demonstrates that public sentiment surrounding institutional farmland ownership can further narrow a market already bound to some degree in at least 24 states.

“Farmland ownership has long been a source of wealth and power in rural America. However, as large corporations continue to gobble up agricultural land as part of their investment strategy, family farmers are forced out of business and rural communities are hollowed out,” according to Booker’s statement announcing the bill.

Booker’s proposal asserts a national public interest in regulating corporate ownership of agricultural land and that continued expansion of institutional ownership is detrimental to US national security. It states as fact that large corporate investors owning farmland are more concerned with short-term profits than long-term conservation and notes the operational scope and economic impacts of institutional farmland investment are increasingly inter-state.

The Farmland for Famers Act calls for a definition of active engagement in agriculture that explicitly excludes solely providing capital and restricts participation of multilayer subsidiary entities in the Farm Credit System and USDA programs. It intends to change regulation of operations with more than 25 shareholders and calls for any unauthorized entity with an ownership interest in ag land to sell within one year or see property go to public sale.

Though it does contain some exceptions for agricultural land acquired or owned by entities acting in a fiduciary capacity – Booker’s office did not return messages seeking further detail – it also imposes a civil penalty of 2x fair market value of ag land in question, and a sentence of up to five years’ imprisonment for knowing violation.

“We must protect farmland from becoming an investment strategy for huge corporations and ensure independent family farmers are not locked out of opportunities to thrive,” Booker said in the statement.

The statement describes Booker’s proposal as an effort to protect the “autonomy of rural communities” and the interests of independent farmers “who form the backbone of the farm sector.” Though each may seem a harmless framing of a good-faith effort to address complicated social challenges though policy, both statements gloss over key complexities.

Despite the romance that rightly surrounds agriculture, the reality remains that food production involves demanding physical labor most people would prefer to not do. The story of the sector’s progress is by definition a story of declining employment and the forces driving the consolidation family farmers face are more structural than even investment by pension and investment funds. Capital and scale are required for modern agricultural development and the Farmland for Famers Act signals a potential risk for investors active in the sector.

Rather than endorse its goal of supporting “autonomy” for rural communities, capital providers and managers should take note of the redistributive sprit running through Booker’s proposal and more forcefully contribute to its laudable aim of helping stop the erosion of public infrastructure like schools and hospitals in rural communities.