US farmland: Scrutiny of foreign investors expected to continue

Panelists at Peoples Company’s Land Investment Expo said public anxiety and ambiguities in state and federal regulations could ‘chill transactions’ and create ‘friction.’

Scrutiny of foreign investment in US farmland among state and federal lawmakers is likely to continue, said participants in a panel at Peoples Company’s Land Investment Expo.

Panelists agreed that while public focus on the issue has refined from prohibitions on all foreign capital towards more targeted restrictions on investments from “adversarial” nations that generally refer to North Korea, Iran, Russia and China, public pressure on the issue is likely to continue.

Micah Brown, a staff attorney at the University of Arkansas-affiliate National Agricultural Law Center, explained that throughout the history of the US, anxiety surrounding foreign landownership has arisen at times of high political tension. The current wave of public and lawmaker interest in the issue, he said, started in 2021 after media coverage of Chinese-linked land purchases in Texas and North Dakota.

Brown pointed out that there are no federal restrictions on foreign investments into US farmland and state-level proposals have been the main venues for debate on the issue, with 36 states either already having some form of restriction or considering one. Adding to the complexity, he said, is the rapidly changing political context in which state and federal efforts to update regulations around US agriculture markets are influencing each other.

The main legislation that acts as a reference point for disclosure requirements on foreign investment in US agriculture is the Agricultural Foreign Investment Disclosure Act of 1978.

Manulife Investment Management associate director for environment and policy David Bergvall said Maine and Oregon were the only two of the 18 US states where the firm manages properties that did not re-examine foreign investment regulations in 2023. Bergvall said California, Oregon and Idaho are among the states expected to re-examine restrictions on foreign investment into farmland during the year ahead.

He added that the scrutiny around disclosure requirements has raised interesting questions about their applicability to individual shareholders, even in public companies.

“That should be really scary for all of you that touch publicly traded companies. You can potentially have someone that is a citizen of a country that is from an adversarial nation, or is on a national security list, is a shareholder; now do they have a disclosure requirement? I don’t think so?” Bergvall said hesitantly. “That is the ‘dot-dot-dot’ of all of this conversation. Those are the pieces we have to start unravelling at the federal level.”

Todd Friedman, a Portland, Oregon-based attorney with Stoel Rives LLP whose work focuses largely on agribusiness transactions, said while he advises clients to disclose as much information as possible, many are unaware of their disclosure requirements. In addition, he said, ambiguities in the way state and federal regulations apply to certain foreign entities are complex and can dampen business activity.

“It becomes much more difficult to advise someone. The effect that that has as a party in a transaction is that it chills the transaction; it creates friction in that transaction. There’s not a legal answer to it, because there’s no way to know. It just becomes a business risk decision for parties that, in the current environment, people are avoiding,” he said. “That transaction just doesn’t get done. That’s the practical reality we are dealing with.”

National Agricultural Law Center director Harrison Pittman said the already narrow room for nuanced discussion among lawmakers on the topic of foreign farmland ownership vanished completely in early 2023 after the Chinese spy balloon incident. Asked by O’Keefe to identify a state or federal level thought-leader on the issue, he struggled to name one.

“There are those that, at least in private or smaller conversations, are thoughtful on it in asking questions, but frankly; the ones that I think had been more thoughtful about it, they went and did the old traditional spineless politician dive,” said Pittman. “They got out of the way, saw the train coming and did not want to get hit by it.”