Foreign holdings of U.S. land increased by 2.4 million acres in 2020, with 40% of the growth occurring in just three states — Oklahoma, Texas and Colorado — according to a new Agriculture Department report. But these holdings are still a relatively small share of U.S. farmland.
The report says 37.6 million acres, or about 2.9% of the nation’s total farm, ranch and forest land, were under foreign ownership in 2020, the latest year for which data was available. USDA won't release the 2021 data for another year.
The report attributed some of the growth in foreign land holdings to long-term leases signed by foreign-owned wind companies on large tracts of rangeland and cropland.
Wendong Zhang, an associate professor of economics at Iowa State University, said more investors — both domestic and international — also chose to invest in farmland in 2020 because they saw it as both a hedge against inflation and as a relatively safe investment choice.
“Inflation concerns and low returns on alternative assets make people think about real estate, including farmland,” Zhang told Agri-Pulse. “At the same time, the pandemic in a sense also pushed people to think about rural acreage and land, not only for crop production, but also for natural amenities.”
Unlike Oklahoma, Texas and Colorado, some states saw declines in foreign landholdings. Oregon saw a 47,931-acre decrease in foreign-held acres after 10 investors sold off their land, while 1 foreign investor in New Hampshire let go of 3,145 acres. These declines were either due to leases being terminated or the land being sold.
Under the Agricultural Foreign Investment Disclosure Act of 1978, foreign investors are required to report their land purchases to the USDA. The agency then compiles that information into a report that is released annually.
However, the report’s authors noted that incomplete and late-filed paperwork may mean the numbers in the report are understated. According to a 2017 article by the Midwest Center for Investigative Reporting, the USDA largely depends on companies to self-report any violations of the law.
Investors from Canada, including both entities owned entirely by Canadians and by U.S. corporations with Canadian shareholders, held 12.4 million acres of land, which represented 32% of all the foreign-owned land reported by USDA. The Netherlands followed, accounting for 13% of all foreign-held landholdings. Italy, the United Kingdom and Germany made up 7%, 6% and 5%, respectively.
Chinese investors, whose ability to own land is a growing concern for legislators, increased their holdings of U.S. land from around 191,000 acres in 2019 to just over 194,000 acres in 2020. U.S. corporations with Chinese shareholders also saw a jump, going from holding over 55,000 acres in 2019 to 157,000 in 2020.
However, even when including the numbers reflecting U.S. companies with Chinese shareholders, Chinese investors still held less than 1% of all foreign-held acres in 2020.
“Foreign land ownership by Chinese investors is a growing and global issue, but these increases are not necessarily showing up in the U.S., it's more probably in Australia and Africa,” Zhang said. “Naturally, given the deteriorating bilateral relations, there is a lot of attention, but so far, at least, we are not necessarily seeing these activities.”
Marijuana investors linked by some to Oklahoma growth
Foreign investors expanded their holdings of Oklahoma land by nearly 383,600 acres in 2020 and now possess 1.5 million acres of land in the state. More than half the land is concentrated in five counties: Cimarron, Custer, Texas, Washita and Woods.
Roger Sahs, an extension economist with Oklahoma State University, thinks the growth of foreign-owned farmland in Oklahoma could be tied to the state’s marijuana industry, which has grown dramatically since marijuana was first legalized in 2018.
At least 8,850 businesses are licensed to grow marijuana in the state, according to the Oklahoma Medical Marijuana Authority. Many of these growers require land to build their cultivation facilities, which could account for some of this growth.
“It has impacted some of the land markets around the state where the highest and best use of the parcel has been typically in cropland or pasture, not greenhouses as currently is the case,” Sahs said in an email to Agri-Pulse. “Given the potential gross market value of the product sold, one could justify a higher price for an asset such as land as opposed to the expected earnings from ‘traditional’ production agriculture.”
Oklahoma Republican and former House Ag Committee Chair Frank Lucas introduced a bill last year that would give the agriculture secretary a spot on the Committee on Foreign Investment in the United States to monitor foreign purchases of agricultural land more closely. He also believes much of the growth in his home state is tied to marijuana operations.
“The medical marijuana business has driven these changes rather dramatically in the last few years,” Lucas told Agri-Pulse. “We didn't have this level of outside purchases before the industry, so it's brought it to our attention.”
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Oklahoma does have laws prohibiting non-U.S. residents from owning land, but these laws include some exemptions for livestock and forestry operations. Additionally, foreign corporations that aren’t formed under Oklahoma law are barred from owning land in the state, but if these corporations are formed under Oklahoma law, they are freed up to purchase real estate.
The growth of foreign-owned land in remote counties like Cimarron and Texas in the Oklahoma panhandle may be because they are more sparsely populated and have less expensive cropland than other parts of the state, Vaughn said.
A spokesperson for the USDA told Agri-Pulse in an email that wind farms with long-term leaseholds also made up many of the newly-acquired acres in Oklahoma.
In neighboring Texas, which has no restrictions on foreign ownership of agricultural land, the amount of land held by foreign investors increased by 287,000 acres in 2020. Now, Texas has the largest amount of foreign-held agricultural land in the United States, with over 4.7 million acres.
Over 1.7 million acres of that land is used for forestry, while 1.3 million is pastureland and 1.2 million is cropland.
Charles Gilliland, a research economist at the Texas Real Estate Center who specializes in rural land, said cropland and forestland have been recent points of focus for domestic investors who want to invest their funds in something tangible. He said it’s possible that this trend also extends to foreign investors, which could explain the increase.
“Investors have been interested in cropland specifically, and some timberland, for some time now,” he told Agri-Pulse. “And recently, most of the brokers that I talked to indicate that the overall demand in the market is crazy and that it can't keep going on like this, so there's been quite a lot of interest from investors."
Foreign investors did increase their holdings of Texas cropland in 2020, acquiring 96,000 acres of that land type in 2020. That year, ownership of rangeland increased by 59,000 acres while holdings of forestland only grew by around 12,000 acres.
Despite the growth, however, the amount of land held by foreign investors only represents around 3% of the state’s overall 153 million acres of private agricultural land.
“They're not widespread enough that they're getting a lot of attention from the brokerage community at this point,” Gilliland said.
Forestland makes up the majority of foreign-owned land in the US
About 46% of all foreign-owned U.S. land, or 17.7 million acres, was used for forestry production, according to the report.
Lloyd Irland, a faculty associate at the University of Maine School of Forest Resources and President of the Irland Group, said increasing foreign investment in U.S. forestland is a “ripple on a much bigger sea.” That sea, according to Irland, is the vertical disintegration of the U.S. forest products industry and continued fragmentation of forests in regions like the South where populations have continued to increase.
Since the 1980s, forestland has increasingly shifted from large lumber and paper companies to institutional investors looking to diversify their investment portfolios, according to a 2012 Journal of Forestry article. Irland said the interest in broadening portfolios may have played a role in the 4.3-million-acre increase in the amount of forestland owned by foreign investors between 2010 and 2020.
“The asset values are fairly low volatility compared to common stocks or bonds,” Irland said. “A lot of investors, whether they're domestic or foreign, are very attracted to that.”
Four of Maine’s northernmost counties — Aroostook, Penobscot, Piscataquis and Somerset — contained not only the most foreign-owned land of any county in the U.S., but also the most forestland.
Aroostook County alone holds more than 2 million acres of foreign-owned land and, according to the report, more than 1.9 million of those acres are forested. Penobscot, Piscataquis and Somerset counties follow, all holding a combined total of over 1.3 million acres of foreign-owned land, almost all of which is used for forestry.
Nearly 82% of the foreign-owned land in Maine, which shares its northern border with Canada, belongs to Canadian investors. It is likely that most of the foreign-held acres in these counties are held by Canadian citizens.
Investors from outside the U.S. also owned thousands of acres of forested land in counties in Michigan, Texas, Washington, Louisiana, Oregon, and Arkansas.
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