Retired US Army General and NATO Supreme Allied Commander Wesley Clark wrote an article in 2011 about the importance of agriculture to our national security.
“We have to walk the thin green line,” Clark wrote in the Kansas City Star. “If we can’t feed, fuel and clothe ourselves, we can’t defend ourselves.”
His warning is especially urgent today with disruptions in the global food supply and price spikes due to war, inflation and pandemics. Not to mention the fact that on November 15, according to the United Nations, the population of the planet exceeded 8 billion people.
Unfortunately, the number of US farms and farmland needed to provide affordable food for all those hungry mouths is dwindling.
According to the U.S. Department of Agriculture, fewer than 220,000 farms—mostly family farms—now produce 80 percent of the nation’s agricultural output. According to the World Bank, America now has just 1.2 acres of arable land per person, down from 1.5 acres in 2000, as farmland is lost to development, transportation networks and other uses.
So what can be done about it? Americans cannot be expected to quit their desk jobs and become farmers, and once farmland is converted to other uses, it almost never comes back.
However, we can take advantage of the unique supply-demand characteristics of agriculture, where demand for food increases while farmland declines, to attract outside money to the industry and help increase farm productivity.
As someone who has spent a large part of my life in agriculture, I believe that giving everyday Americans the opportunity to invest in farmland and in turn invest in the success of agriculture is a huge step in the right direction.
When Americans from coast to coast have a real financial stake in the success of agriculture, they are more likely to educate themselves about and advocate for the business. Misconceptions about modern agriculture are diminishing, the rural-urban divide is narrowing, and consensus is building on arming farmers with the tools and government policies needed to boost productivity and reduce risk.
So I was surprised to see some take a stand against investors in farmland, which represent a tiny fraction of the overall market.
Such adversaries do not only target investors from hostile countries with nefarious agendas.
They talk about making it harder for honest investors in the U.S. to own land they lease back to farmers — a strategy that could drive a wedge between Main Street and Wall Street, requiring farmers to take on more debt from lenders to buy land and increase in activity.
At a time when interest rates are rising, shouldn’t we be looking for ways to get more equity capital into rural America instead of leaving farmers tied to debt capital? I can’t think of any industry, including agriculture, that has less foreign investment.
Such proposals against investors – and frankly against farmers – are not unprecedented and play into populist tendencies. A few states banned corporate ownership of farmland decades ago in the name of helping farmers, effectively locking investment vehicles and pension funds out of those markets.
I do not believe that these laws have helped farmers, made land cheaper for young farmers, or benefited retired farmers or family members who want to sell. And I fear that emulating these laws in other countries or on the national stage would be a mistake.
That’s because these laws have historically harmed market transparency and competition and increased price volatility where they were passed — while doing little to limit the selloff of farms to condos, shopping centers, and even billionaires looking to grow their personal property.
It has also created an environment in which farmers often find themselves with less sophisticated landowners who lack the knowledge or resources needed to make significant improvements to the land.
Investors are encouraged to increase asset value by improving farm productivity, so our company often invests in irrigation, drainage systems and on-farm grain storage to help farmers increase profitability. We often lease farms back to the same farmer who sold the land, helping them stay on the family farm and release equity.
Agricultural land investment vehicles also typically set a floor, not a ceiling, on farmland transactions. This is because we have to answer to the shareholders, so we are careful not to overpay. On the other hand, farmers carry out agricultural activities that help in higher bids.
Placing prohibition signs on American farmland and burdening farmers with more debt will not feed a growing population. If anything, agriculture needs more everyday Americans investing in its future and becoming financially interested in keeping the thin green line from getting thinner.
Paul Pittman is president and CEO Farmland Partners Inc. (NYSE: FPI ), the nation’s largest agricultural real estate investment trust (REIT) by acreage. The company owns and/or manages approximately 195,000 acres in 19 countries.
