Examining the Impact of New Laws on Foreign Ownership of US Farmland
MyEListings' markets and economics editor and creates content about global macro events and their impact on US commercial real estate.
The United States has positioned itself as a beacon of free-market capitalism, opening its doors to foreign investments in various sectors, including agriculture.
Growing concerns surrounding national security, however, have prompted legislative actions that may close the doors to foreign ownership of one specific asset class: US farmland.
The Arkansas Precedent: A Turning Point
In a recent landmark action, Arkansas Attorney General Tim Griffin has mandated Northrup King Seed Co., a subsidiary of Syngenta Seeds, LLC, which is ultimately owned by China National Chemical Co., to sell 160 acres of agricultural land within two years.
This move comes after the enforcement of Act 636, which prohibits foreign-party-controlled businesses from acquiring or holding public or private land in the state.
Syngenta's Stance
Syngenta, originally a Swiss company, owns approximately 1,500 acres of US agricultural land used for research, development, and production.
The company stresses that its Chinese ownership does not influence its land acquisitions in the US and is integral to meeting the needs of American farmers; however, were this not the case, it could hardly be expected to admit as much.
The National Perspective: A Growing Trend
Arkansas is not the only state taking a stance against foreign farmland ownership. As of now, two dozen states have either prohibited or restricted foreign investments in real property, with another dozen considering similar bills.
The federal government is also exploring avenues to limit foreign land ownership, with proposals to revise real estate ownership rules near military bases.
Foreign Ownership Statistics
Looking at which foreign entities own what US agricultural land reveals little of significant impact:
- As of December 31, 2021, foreign persons reported holding an interest in over 40 million acres (3.1%) of all privately held US agricultural land.
- China's investors own just 383,935 acres, representing less than 1% of foreign-held acres.
- Canada, the Netherlands, Italy, the United Kingdom, and Germany are the biggest foreign holders of US agricultural land.
There seems to be little advantage to owning US farmland for adversarial purposes; most foreign ownership appears to connect legitimately to investment or business interests.
Legislative Actions: State and Federal Levels
Various legislative measures are currently in motion at both state and federal levels. In Congress, the Foreign Adversary Risk Management Act (FARM Act) and the Security and Oversight of International Landholdings (SOIL) Act are under consideration.
These measures aim to designate the agriculture supply chain as critical infrastructure and impose additional reviews on land purchases by foreign entities.
Historical Context: Past Legislative Efforts
The concern surrounding foreign ownership of US farmland is not new. The 1980 Foreign Investment in Real Property Tax Act (FIRPTA) was enacted to mitigate foreign purchases through taxation.
Additionally, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) broadened the scope of the Committee on Foreign Investment in the United States (CFIUS) to review foreign investment transactions affecting national security.
The Weak State of Foreign US Farmland Ownership
The United States finds itself at a crossroads, balancing national security concerns with its long-standing tradition of free-market capitalism. The recent legislative actions at both state and federal levels reflect a collective effort to safeguard the nation's agricultural land from potential foreign threats.
Currently, entities governed by countries adversarial to the US own no significant or material amounts of agricultural property. What little foreign ownership exists is, in fact, dominated by friendly government-regulated entities. New legislative actions are unlikely to impact them.
What regulations do exist, however, could be exploited by a willing adversary as they vary by state and enforcement initiative. Having a common standard emanating from the federal level could secure ownership of US agricultural land for the exclusive direct benefit of Americans.
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