Thursday, September 17, 2015

Wall Street investors buying farmland; farmers complain that land prices are too high

Wall Street investors are buying up farmland, leading some farmers to complain that farmland prices are being driven up beyond their ability to turn a profit, Christopher Doering reports for The Des Moines Register. "The farmland real estate market is valued at $2.5 trillion, with institutional ownership likely responsible for less than 1 percent, according to Bruce Sherrick, professor of farmland economics at the University of Illinois’ TIAA-CREF Center for Farmland Research. But that small number is poised to grow." In Iowa, for example, land prices have risen almost 330 percent since 2000, according to Iowa State University. (Register photo)

"A study released last year by the Oakland Institute, a California think tank, estimated as much as $10 billion in institutional capital is looking to acquire farmland," Doering writes. Greenwich Associates, which surveyed 100 fund executives in 2014, "found that a third of respondents said they might invest more in farmland through July of this year. It was the second most popular investment among 13 categories, behind only energy."

"Farmers have grown increasingly concerned that real estate investment trusts, pension plans and other farmland investors lack the close ties and direct knowledge of what it takes to maintain the property and implement necessary conservation measures to preserve it," Doering writes. "They also worry their involvement has the potential to shut out local farmers by outbidding them when land goes up for sale."

Justin Dammann, a corn and soybean producer from Essex, Iowa., told Doering, “We farm this land, and if we are profitable, that money goes back into our own farms, into our own communities, into our own schools, into our own churches. If an investment company from New York comes out and buys land in Iowa and they make profits in that land, those profits go out of state, and they are not realized here.”

Doering writes, "Iowa, along with a handful of other predominately Midwestern states, have [sic] taken steps to keep corporations off the farm. Iowa passed its law in 1975,and has since updated it to prevent corporate entities other than one established by a family farm from having more than 25 people who are shareholders or acreage topping 1,500 acres. However, individual investors in the United States are not banned from buying land for themselves in the state." (Read more)

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