The group takes its portfolio of US land nearly to 100,000 acres – in a deal which will provide collateral for funding for more acquisitions
I’m beginning to wonder if it’s time to start to become worried about this trend. Farmland Partners is just one of dozens of investment companies buying up enormous amounts of farmland. Not to farm it themselves, but to turn around and rent it at the highest prices they can possibly get.
Given the volatility of the stock, bond and commodities markets, and the ridiculously low interest rates being paid by banks for standard savings accounts, the desire to invest in a fairly stable and relatively profitable venture like farmland is understandable. Farmland values do fluctuate, true, but not nearly as wildly as stocks and commodities. Compared to those ventures, farmland seems a fairly safe investment.
And a potentially profitable one because the land doesn’t just sit there, it gets rented for as much as $200 – $500 an acre, depending on local demand.
But I get very nervous when I see more and more farmland being concentrated in the hands of fewer and fewer owners, especially investment companies who have no vested interest in preserving the long term quality of the land, and only in making a return on investment. This practice makes it increasingly difficult for real farmers who want to get into the business to get started. Land has become so expensive in many parts of the country that it’s difficult or even impossible for a small start up farm to get off the ground without having the backing of outside investors.
Even worse, because the holding companies are going to charge the maximum rent they possibly can, those who can afford to rent the land are going to be forced to engage in the most intensive, potentially damaging, high chemical input farming techniques they can in order to maximize their own profits. This results not just in increased pollution from fertilizer, pesticide and herbicide run off, but also results in the degradation of the quality of the land and it’s fertility, causing even further reliance on intensive chemical intervention to continue to get the best yields.
Is this legal? Yeah. It is. At least in most states. Some states have restrictions on the amount of farmland that can be owned by out of state investors, but over the years those laws have been changed or even eliminated to permit companies like Farmland Partners to move in and take over. And I can understand the attraction. I own a fairly big stock portfolio, and the volatility of the market often makes me more than a little nervous. Farmland seems a far more stable, if a bit less profitable, investment for a lot of people.
While it may be legal and understandable, that doesn’t mean it’s the right thing to do.
Personally I feel the adverse effects of these companies; the artificial inflation of land prices, potential degradation of farmland, etc. outweighs the benefits.