Midwest Agriculture Conference: Who Owns Midwest Farmland? And Why?

DAVID OPPEDAHL: Great to have good discussion. And I think that you will really enjoy our next two presenters as well. We have Wendong Zhang from Cornell University to talk about some of the energy aspects of farmland ownership, and then Mykel Taylor who will talk about foreign ownership of farmland in the United States. So Wendong, go ahead.

WENDONG ZHANG: If you don't mind, I will walk around and try to spice things up a bit. Hi, everyone. Good morning. I'm Wendong Zhang, and I think from the title, I actually just got promoted. I'm actually assistant professor at Cornell. So what I'm going to talk about is I'm actually going to talk about some different elements of energy infrastructure, but I want to start-- given the current discussion, I want to talk about some of the things I don't have things prepared.

One thing is related to Bruce's comments on anti-corporate farming laws. So if you don't know, Iowa is one of the eight or nine states in the country that restricts the corporate land ownership. So essentially, the Iowa law says if you are a corporation that has 25 stockholders or more, then you cannot easily own land beyond 1,500 acres in Iowa.

So that's why if you're looking at the Farmland Partners, the REITs, ag REITs are buying near Bruce's neighborhoods in Urbana-Champaign, but it's not in Ames, Iowa. So there are some impacts that I have seen pension funds and things like that that has less presence in Iowa, but as [INAUDIBLE] mentioned earlier, even if you look at the Illinois data, the percent of the land that is bought by investors are still at probably 35% as opposed to 25%. So, it's still the dominant buyer or the existing local farmers.

And as Todd mentioned, that the Iowa data actually shows 80% of the-- so typically-- it's the typical case of the Midwest farmland ownership is one farmer only typically own land in one county. At most, maybe in one or two nearby counties. And another element of this is related to if you're thinking about the institutional investors, they have tighter rules on the rate of return, which they want to have 3.5-- or at least 3%, which limits how much they want to bid.

So it's pretty high bids are often from the competing local farmers. My predecessor, Dr. Mike Duffy at Iowa State, used to say that if you want really high prices, you want two loaded farmers who hate each other.

And so that's one element. And we got several questions regarding carbon credits. I also strongly encourage you to check out the work of my colleague, Alejandro Plastina at Iowa State, who has he has tracked the carbon credits, especially for the Midwestern ag.

But in general, Alejandro and I have also done work related to appraisal. What we have done is that we feed experimentally the real estate appraisers no information and basic soil health test information and extensive soil health test information, and we compare their appraisal reports. And what we see is that there is more discussion if you feed more information about soil health, but in the actual numbers, that they are not necessarily that different.

So we teach farmland appraisal classes in land grant universities. If you're looking at the traditional practices, typically mainly relying on crop productivity indexes, but it's not necessarily incorporating soil health indicators in the current practice. That we actually have-- like Mr. Glenn Smith, who is the certified appraisers. I'm sure Glenn does things much better.

But in general, if you're thinking about the general farmland appraisal practices, these considerations about carbon credits and soil health are not necessarily incorporated into the practice yet. In part, one part of the challenge is that we don't have a readily available database that we can see which parcel had these practices and where the information we can find related to these soil health indicator.

But I think over the next few years and hopefully the next decade, we'll see a lot more readily available data than there could be some more changes related to rules and practices as well. So related to that, what I'm going to talk about is more on energy infrastructure. So I had the pleasure to work at Iowa State for seven years before joining Cornell.

And at Iowa State, I led the Iowa Farmland Value Survey and Ownership and Tenure Survey. And currently, I have to say, I'll tell you that it's great to be back in the Midwest because currently I'm at Cornell, and there are none of these surveys are available. And New York City Fed not necessarily care too much about ag either.

So if you're looking at the farmers in New York, they're less fortunate compared to farmers in Iowa, that there's really hard to get these regular information outside the US Midwest. So the Midwest has strong support from land grant universities, but also Federal Reserve, which is not necessarily the regular case across the country. So I think we are in the-- there's a reason why the corn belt is the indicator for agricultural markets, especially for land markets.

So one of the things I want to talk about is I want to touch on several different aspects of energy infrastructure. We'll do it very quickly and cursively. So if you have questions, feel free to let me know. And a lot of the work are still a work in progress, and you can also see a lot of the information are also localized as well. So these effects may not necessarily directly translate to your neck of the wood, but I want to highlight these emerging factors.

And increasingly we see that beyond the soil productivity, the things that we care about, increasingly the environmental policies, the carbon credits and energy policies, low carbon fuel standards are changing how farmers are making these practices, and those are also increasingly reflected in the capitalized value for farmland as well.

So one of the factors that is very relevant for Indiana and also in US Northeast is solar farms. So this is the example of agrivoltaics. So there's a traditional way of doing the solar panels, is you go and find flat grounds, you put a bunch of solar panels in.

For example, New York has very ambitious energy and climate policies, and they're expected to probably devote maybe about 200,000 acres of US New York State farmland devoted to solar development. And there are some oppositions from the farmers complaining about taking land away from production to fund these energy infrastructures. So is there active research looking into whether you can develop dual-use systems?

So that is, hence, the agrivoltaic. So whether you can raise sheep underneath-- or between the rows of the solar panels or grow crops as we see here. And a lot of these examples are coming from Europe, not necessarily from New York State. And one of the innovative example I have seen is from South Korea. This is between the rows of like highways. And this is creating a solar rooftop, and within that is sort of a bike lane that you bike underneath.

So we haven't seen this utilized in the US context yet, but what we are analyzing are not these innovative ones, we're analyzing, you go and find a flat grounds and you have 300 acres of solar panels, and we are looking into whether this is how this is impacting nearby farmland values.

So this is-- all the dots are representing the large-scale solar farms. This is from the Berkeley Lab. And so we have a couple of-- I want to show you a couple of studies that have looked into property value impacts of these solar infrastructures on residential homes and also farmland values.

For residential homes, the conclusion are fairly consistent. They're regarded as visual disadvantages. And in general, you see a property value of housing price, residential prices decline if you have a solar farms nearby.

For farmland values, things are a little different. Laura Taylor has done a study in North Carolina. There are also some studies recently have done the present preferences for large solar sightings. In general, the general public prefer these sites are being developed on commercial, industrial, or brownfields as opposed to in area that is using farmland or forestland. So this is the general preferences. And if you're looking at the values for the changes, in the North Carolina case, there is essentially the evidence says if you are closer to the solar farms, there's not a whole lot of differences between the farmland sale prices after-- before or after the solar farm is being constructed for nearby parcels. What really have changed is if your state started to embrace renewable energy policies like solar, then for parcels nearby-- near the transmission line, those with higher energy development potentials could potentially enjoy a premium.

So next to a solar farm itself doesn't necessarily give you a premium or decline, at least there's not statistically distinguishable way. What has really changed is if you have a parcel close to a large-scale energy-- electricity transmission line, then you are easier to be developed in the future. So this increase the development premium that Todd mentioned by these large energy companies and that potentially can bring premium for your land parcels.

So we also find similar things in New York State as well. This is an ongoing work with a master's student in New York State. What we are finding is that if you're looking at all these green bars, if they're touching this 0 line, which they are, before and after the solar farm being constructed, then there is no statistically distinguishable changes due to the construction of solar farms.

So there's-- in general, if you are thinking about the proximity to solar farms, there is no distinguishable way of quantifying whether there is a premium or discount. What's really clear is if you're within close proximity to energy infrastructures, electricity transmission lines, or better yet, substations, then that potentially can give you premium for future development, especially in a state that you anticipate further growth of the solar energies. So that's one of the thing.

And that's what we find in this one as well. This is a work with a PhD graduate who graduated from Cornell and she's working at UCLA now, and worked with my colleague Ariel Ortiz-Bobea, that all these dots are essentially-- on the left are the transmission lines and the substations.

So what we're trying to do is we're looking into what are the agricultural land sales in New York State that are within 2 miles of these energy infrastructures? So these are the red dots. And the green dots are the agricultural farmland sales that are outside these critical energy infrastructures that the solar company prefer. So essentially, we're comparing the red dot sale prices with the green dots and to see whether there is a difference.

The punchline is, the red dots, who are closer to electricity transmission lines or substations, enjoy a premium after New York State start to embrace solar development policies. And so what we're looking at is in 2015, the former Governor Cuomo essentially announced a policy that there is a shared renewable program policy that allows easier access of communities for development of these large-scale renewable policies.

And this-- after these policy, especially more recently, since 2019, 2020, and for parcels in the red dots area essentially are enjoying on average about 10% premium compared to the green dots. So the nearby was higher energy potential-- development potential places are enjoying about the 10% premium after these renewable policies start to kick in a few years later. So after these policies are gradually being rolled out and there is more and more development.

So currently, if you're looking at New York State, there are about 1,000 large-scale solar farms have been constructed. 0 are the dual-use. So the developer always talk about they want to take marginal grounds for these development.

But if you haven't driven in agriculture-- agricultural places in rural places outside the Midwest, it's a very different and it's very hilly. And USDA Economic Research Service actually has a very interesting map called How Rugged the Road Is Across the Landscape. You can look at the Northeast is actually not very flat.

And the fact that when they are finding a flat grounds, typically they are not the marginal ground they claim they want to use. So typically it's a prime farmland taken away. So that tends-- the opposition and a lot of the complaints from the local farmers thinking about how this is-- how the energy development are affecting agricultural production.

So another thing I want to touch on is related to wind turbine. So similarly, that Berkeley Lab have worked with USGS and just released this US Wind Turbine Database. You can find a lot of information about where they are and the capacity and other things.

And if you're looking at where things are-- and this is from the Dakotas and from the 7th and 10th districts of the Chicago and Kansas City Fed essentially down to Texas. These are the high-wind potential corridors. So there's the reason why these wind turbines are placed there, and we're again, trying to look into how this potentially impact farmland values.

I want to share with you two pieces of research. One is from Germany, and this is showing you that the wind turbines in communities-- higher cumulative capacity of wind turbines in communities leads to, on average, a higher transaction prices. So in general, if you are seeing more wind development-- so these lease payments or associated competition for nearby grounds are showing being capitalized in the German land market. And on average, there's a per-acre-- per-hectare prices increased about half a percent.

And there's-- Mykel has done some work in the Midwest using Kansas data looking into on-farm and near-farm effects of wind turbines on agricultural land values. And in that one, they didn't find evidence in the Midwest context that nearby wind turbine itself will increase land values when installed on a parcel. It's very similar to the solar story.

Being close to these energy infrastructure doesn't necessarily improve your transaction prices immediately after the development, but within the corridor, if you're in a high-wind potential area, that's potentially can bring some premium. I will give you some other examples to support that.

But right next to it, compared to the parcels a little further away, there's not necessarily statistical evidence that immediately there will be a change, either a premium or a decline in that. And Mykel will talk about foreign land ownership, but I just want to highlight one piece related to that.

So one, there is a lot of growth in foreign land ownership, and a one part of that is not only outright purchases, but also long-term leases with 10-or-more-year leases. And those are especially relevant for the Midwest. And if you're looking at all the land that is leased out, a lot of these land that has foreign rights, foreign interests, and those are related to lease for development related to renewable energy.

Especially the light blue circle on the right, those are showing a lot of those foreign interests related to land ownership are related to wind energy leases. And those are-- so going back, that a lot of these dots in the left panel of this chart are-- certain significant amount of those are has foreign interests in those as well. They are tied with farmland foreign interest and those are not outright purchases, but 20, 30-year leases.

We recently have a paper on the third factor related to electricity transmission lines. So I have talked about that the electricity transmission line seems to be one of the critical factors that when the solar developer and wind developer, when they are choosing where parcels to put these wind turbines or the solar farms, and these are the proximity to these existing infrastructures are important consideration where they place these energy infrastructure.

And we have just published a paper which we looked into proximity to these electricity transmission lines in the Midwest using-- looking at 12 states from Dakotas to Michigan. So it's about to Missouri, Kansas, about 12 states. And we looked into impacts for two types of properties, residential homes and farmland values. So here is the results.

On the right chart is the traditional story of how electricity transmission lines affects residential homes. So if you see a line that is 0, that's no effects. And then all the green bars are below that shows a discount rate. So if you are within 0 to half a kilometer-- so about 500 meters. So 500 meters with-- if the transmission line is within 500 meters, about like a very-- it's a little over a quarter of a mile to your home.

So you can see them. You can potentially hear the noise or visual disamenity. So your housing prices will be affected by as much as about on average, in a Midwestern context, about 5% discount. And the more you move away, if you are beyond 2 kilometers, there's no distinguishable discount anymore. So the closer you are, the heavier the discount. So that's what has been shown in the literature through different countries and different states.

What we add to the literature is there's very little literature looking into how this actually impacts nearby farmland values. Originally, we actually expected potentially a visual disamenity story as well because that's what the Italian researchers find in the Italian context. However, we find that 0 line is there and the sign is flipped. It's upward.

So the closer you are to the electricity transmission lines, what happens is this brings about a 10, 15% of premium compared to the farmland parcel that is about 10 kilometers away. So it's about a 7, 8 miles away compared to that distance parcel. If you are closer to the electricity transmission lines, this can bring the premium.

Which we also find is if you interact that premium with the dummy for high-wind potential. So imagine that you're interacting with the area-- what we define is at 100 meters, if you are 7 meters per second, so that's over 85% of wind turbines are installed. So in a high-wind potential area in Western part of Iowa, for example, then these premium are even strengthened.

So a part of the premium is coming from the potential-- development potential coming from proximity to these infrastructures that attracts the wind development companies in the Midwest to invest in these parcels, and that brings some additional development premium reflected in the farmland sale prices.

And so again-- so in this one, that we looked into all the red dots are the wind turbines, and the gray areas, the darker gray areas are the high-wind potential area, you can see over 80% of these development are in those area. So essentially, if you're in the parcel that in those areas, then you enjoy further premium if you're closer to transmission lines. That's the third factor. So solar, wind, electricity transmission lines.

We also have ongoing research related to broadband internet. So I have a former PhD student who graduated from Iowa State that looked into how broadband internet speed upgrades impacting farmland and sale prices and cash rents, and look into the Midwestern area.

In general, we do see a positive evidence, statistically significant evidence of better internet connection and higher download speeds and upgrade speeds related to rural broadband access and speed will be reflected in farmland sale prices, and to a lesser extent, on cash rents as well.

So there is a correlation between the better access to energy infrastructure in this way related to farmland prices as well. So this-- you can think about this potentially can improve your Zoom connection with your kids and grandkids, but at the same time, if you're driving the John Deere combines, then all the data that is needed to be loaded to your system could also benefit from better access to the broadband internet as well.

So the one last thing I want to mention is related to pipelines and pipeline accidents. So we actually didn't study the trendy carbon pipeline, there's not a whole lot of actual data on this. So I'm reporting to you a study related to in the residential sector on pipeline accidents related to natural gas and oil.

So this is-- we're looking at nationwide. We're looking at gas distribution pipelines and looking into how this impacts residential home prices. So if you're thinking about you as a homeowner, you don't necessarily know that you have natural gas distribution pipeline nearby until you got notified there's one-- there was an explosion or you need to be evacuated or there's a fire due to the accidents or things like that.

In general, we find that if you have an accident nearby related to these pipelines, then immediately you will see a discount for your housing prices. And the more visible these accidents are, if there is more evacuation and explosion and news coverage and things like that, you will see more discounts related to that as well.

And Ohio State Agronomy Department has done some experimental tests on how pipeline installation impacts crop yields. In general, for their limited survey samples in northern part of Ohio, they do see that the corn and soybean yields potentially decline over the pipeline compared to adjacent areas. So these disturbance of the pipeline installation for these directly impacted fields could potentially impact crop yields.

But we have very little information about how this impacts nearby fields that is undisturbed by these infrastructure itself. And it's very interesting to also see how the payments associated with the carbon pipeline reflected in those as well. So with that, I will close. I will transition to-- Mykel will talk about the--

DAVID OPPEDAHL: We could take a few questions.

WENDONG ZHANG: OK, sure.

DAVID OPPEDAHL: Any questions? I'll start with one online here. How has solar farms and solar leases impacted farm values?

WENDONG ZHANG: Yeah. So we have looked into the solar farms. What we have find is that on average, if you are looking at proximity to solar farms, it doesn't necessarily change the farmland value itself. The more and more development of the solar farm in your area potentially will lead into more bidding of the renewable energy companies bidding the vacant nearby-- near the transmission line substation parcels, and for those parcels, that will bring some more premium.

And so these-- it's interesting. There's ongoing research to look into that when the solar lease happens, when the owners receive these payments, where do they spend? Do they spend locally? Do they spend out of state? Are they the local owners? Are the non-operating land owners? There's still ongoing research looking into that. Yeah.

DAVID OPPEDAHL: There's also a question about do you feel like the full potential for the use of biodiesel for aviation fuel has been priced into current land values? So--

WENDONG ZHANG: Yeah, that's a very good question. So currently we are doing some research related to renewable diesel using soybean oil with [INAUDIBLE] at Iowa State. I think that the development is less than the industry originally anticipated, but if you borrow the story of the ethanol plants, proximity to ethanol plants does change crop bases. So it does improve crop prices and are later capitalized in nearby farmland values as well. Those are quite localized.

So back in the day, if you're thinking about the Iowa farmland values, Eastern Iowa closer to the Mississippi River enjoy higher effective prices. Due to the energy ethanol boom, the construction of ethanol plants in Western Iowa, especially Northwestern Iowa, essentially have leveled these price differentials and have boosted the local prices.

And currently, we haven't seen much action at how this will impact, but to the extent that if there is additional demand for soybean oil, that will change-- has significant change on land use related to soybean and potentially export patterns and whether the sustainable aviation fuel, how much quantity this will demand for these product production could also be affecting these developments in a similar fashion as well, but I think it's less than the industry projected.

AUDIENCE: Wendong, you mentioned the correlation between broadband speed and land values. And just an observation, that Farm Credit Administration, Mike and I witnessed an explosion of rural housing loans in areas like the Texas district comes to mind. Rural seaboard states with moderate climates, and particularly after COVID.

WENDONG ZHANG: Yeah.

AUDIENCE: And a real common factor there was broadband access. And even in the Midwest, we saw a real surge in rural housing loans.

WENDONG ZHANG: Right.

AUDIENCE: Now it has leveled off, but for the first time, and you've seen Economic Research Service had come out and said that it had reversed a lot of the trends in population going down in rural areas. Those trends had reversed after-- as many years as I can remember.

WENDONG ZHANG: Yep. So that's a really great observation, and I think there are some research looking into after COVID, there's exodus outside, like from California and New York City and to rural areas, especially if they have good natural amenities like near lakes in Idaho, or they can still remote work related to broadband internet. And there's even stronger-- there's a lot of research related to how broadband access related to local business starts and economic growth. And so the farmland value is actually a looser linkage, but we're-- so we still find some robust relationships there as well. I think-- Bruce?

AUDIENCE: I have a semi-similar comment about you've got to be careful with phrasing because it's like Christmas cards cause Christmas [INAUDIBLE]. There's lots of reasons why you would expect the development of broadband to happen where there's other economic pressures [INAUDIBLE] as well.

WENDONG ZHANG: Yes.

AUDIENCE: [INAUDIBLE]

AUDIENCE: Oh, I'm sorry. Yeah. What I just said was really interesting and it'll never be recovered on that.

[LAUGHTER]

The real question I have is, could you comment on things like the Summit Carbon Pipeline and the abandonment of the Heartland Carbon Pipeline and the claims of the ability to take that much CO2 out and inject it, and claims of impact on corn prices. Do you think that's going to happen? Like the Net Zero America Project, if that all happened, that would be really positive for farmland value? Like extending out-- and maybe this is a Mykel question as well.

WENDONG ZHANG: Right. I think-- well, currently we are not seeing these effects yet. So looking forward, assuming the carbon credits markets really take off and there's a significant demand and payments injected into the agricultural economy supporting these infrastructure or practices, these payments will potentially be eventually reflected in the land values.

But it's typically will take much, much longer than the-- so the commodity prices will reflect these-- the excitement of the new programs much quicker than farmland markets related to the specific ones. And I think that the developer are fully convinced that these will eventually go through.

So what they happen is that before they even get approved from the state government, they start to buy along the routes, planned route of the pipelines. I think at least three planned carbon pipelines that's ongoing, and I think there will probably will be-- over time, there will be even more efforts as well. But so far, we haven't really seen much interest yet. Effects yet.

AUDIENCE: And do you think the country's commitment to greening of energy will lead to that inevitability via either subsidy or mandate or something else?

WENDONG ZHANG: We are effectively seeing a lot of those are driven by policy related to renewable diesel, that California's low carbon fuel standards is behind a lot of the development of those. I do think that increasingly-- why I'm interested in these topics is increasingly when we are just-- even if we only care about agricultural phenomenons and farmland markets and agricultural yields and agricultural incomes, and they are inevitably and increasingly influenced by environmental and energy policies that are done not necessarily with the agricultural stakeholders as the primary audience, but the farmers are influenced by those, and similar for trade as well, I think, yeah. And I think these topics are increasingly important, yeah. But the specific magnitude-- I will give you the classic economist non-answer, it depends.

DAVID OPPEDAHL: On that note, let's transition to Mykel then.

[APPLAUSE]

WENDONG ZHANG: Mykel will have better answer than I do, I'm sure.

MYKEL TAYLOR: Thank you. Good morning.

AUDIENCE: Morning.

MYKEL TAYLOR: Thank you. I noticed that you sit in the back like my students, but that's OK. So my name is Mykel Taylor, and I am currently at Auburn University. I was telling these gentlemen that I've been around the block a few different locations.

So I've been in North Carolina and Washington State and Kansas, and I'm originally from Montana. And so that's given me the opportunity to see agriculture in a lot of different spaces. And let me get to my slides real quick here. And so we're going to talk a little bit about these land markets and how they operate with regard to foreign investment.

And Wendong actually contacted me about a year, a year and a half ago and said, we really need to get into this space and look at this because this is going to be a very hot topic. And if we can bring some information to the conversation that's as objective as possible, that would be useful. And I agreed with him, and so that's what we're going to talk about today.

So we know that drivers of value are unique to the area. If I'm in Western Kansas, it might be wind, it might be dairies, it might be feedlots that drive the price of land. And so we look at agricultural productivity and we think it should be the main determinant, but there are many other factors that affect price and we look at things like recreational demand, urban-suburban expansion, oil and gas, and wind and solar. And so then the question starts to come up that we see these land values start to increase and is it the foreign investment that's driving it? So the current environment for foreign investment is pretty hot politically. There are many states that are proposing and/or passing legislation that will restrict foreign ownership of farmland in some way, shape, or form.

Again, they are happening at the state level, so it's a patchwork of laws as opposed to the federal level where it's one law that's determining everything. But there are some federal legislative proposals that are coming forward. Some of them, I think, will be hard to pass because so much of our land value or land ownership laws are at the state level, and that's where we tend to keep them.

And there's also been a great deal of focus on Chinese purchases. So you can see a couple of the headlines that we've pulled from different news networks talking about why people are buying land, what's going on. They're throwing around really big numbers, some really scary things, and we need to put this in perspective.

So it's a little bit of a background on AFIDA. Do any of you remember when AFIDA was passed? It was in 1978. OK. All right. So AFIDA, which is the American Foreign Investment Disclosure Act, does not do anything to prevent foreign investment in ag land. What it does instead is it requires that people disclose what they've bought and where they bought it.

So the name of the foreign entity or the person, the country of residence, the parcel acreage, the land use, if it's cropland pasture forest or other ag land, its purchase price, and the date of transfer. Now, the acquisition-- the word "acquisition" in the case of AFIDA means not only ownership, but it also means leases of 10 years or greater. So that's really important to know.

A lot of what you'll see in the media, we'll talk about foreign acquisitions of land. That's not just ownership, it's also these long-term leases. So a little bit of-- more background on AFIDA. Failure to comply with a to results in a civil penalty of up to 25% of fair market value of the land. So you're supposed to report this. You're not supposed to keep this information to yourself.

USDA also publishes an annual report of the foreign ownership that you can get online, and it gives you an update every year of what's going on in terms of that AFIDA database. All right and it also does not track commercial or residential acquisitions. So this is just ag land.

But in my world, especially when I was living in Kansas, I didn't think about trees because we didn't have any. And that's an exaggeration. It's OK to laugh. All right. So it also very much so includes timber. So we have two charts here. We have the top, which is cropland holdings. That shows you quite a distribution across a good portion of the country.

And then the bottom map shows you timberland holdings, which you can see Maine, the Southeast. Alabama especially has a large amount. And then you can see in the Northwest. So that's all lumped in to these ag land acres. It includes timber and cropland.

So I'll just give you a real quick update. If you are interested in this topic and you want to the latest information on legislative activities, you really need to bookmark the National Ag Law Center at the University of Arkansas. They do an excellent job of keeping track of what's going on in the space and have a Frequently Asked Questions page that is very useful.

So right now, there is no federal law that prohibits the ownership of private land by foreign persons or entities. There are some proposals to mandate reporting for leases that are five years and greater as opposed to 10 years and greater.

There's about 24 states that have laws to seek-- that seek to restrict some degree of foreign ownership or investment in private land, but they vary widely based on how they define ag land or farming. The amount of land that can be bought, who can buy the land. Like I said, when you start having legislation at the state level, it's a patchwork. So one state to another could be very different in terms of what's allowed and what's not allowed.

But as of 2023, most states have proposed or have plans to propose at least one piece of legislation that's going to affect ownership by foreign entities in their state. So this is definitely on everybody's radar no matter where you live.

What went wrong and I did was we foiled the Farm Service Agency for a copy of their database through 2020. It contains over 40,000 voluntarily reported ownership or long-term leases by foreign owners. And then we created some tables and maps to help visualize what's going on with foreign acquisitions across space and time, so I'll talk about that for a few minutes.

So we'll throw out a number here. Total amount of foreign or leased land in 2020 was 37.6 million acres. That's a big number. But it's only about 2.9% of all privately-held ag land. That's a small number. So who is it that owns this land?

Well, the largest holder is-- and this is a little bit deceiving. It's not Canada. It's Canadian persons and Canadian entities. OK so the country of Canada does not own 3.8 million acres, but Canadian citizens do. And so you'll see, my top five countries of origin are Canada, Italy, Portugal, Germany, and the UK. That's for cropland.

And then you see this big jump up in ownership for total holdings by Canada, which is 12 million. And so what you can see is that Canadians are very heavily invested in timber. That's a big part of their portfolio in the United States. So is the Netherlands. And then followed by Italy, the UK, and Germany.

So the top states with foreign ownership. Texas has the largest holdings, followed by Maine, Alabama, and Colorado. But we thought it would be interesting to compare total holdings, which are on the left, with holdings that were just acquired in the year 2020. So recent purchases. And the recent purchases are Oklahoma, Texas, Colorado, and Kansas for the top acquisition.

So what do those four states have in common? Yes, wind. So we're getting a sneaking suspicion here that wind might be a big motivating factor for some of these acquisitions by some of these foreign companies. And we'll talk about that a little bit more in a minute.

So Wendong created this chart and I really like it because what it does is it gives you a sense of who's buying land, who the top buyers are, and by how much. And if you can tell the difference between the green and the red, the green are acquisitions between 1970 and 2010. So over a 40-year period. And the red are acquisitions between 2010 and 2020, a 10-year period.

So you can see that Canada, for example, has bought almost as much land in the last 10 years as they had acquired in the previous 40. The Netherlands is a completely different case. Most of their acquisitions were prior to 2010. And then you can see down there that China is number 18. So for all the press that China has gotten, it is not a major holder of US ag land.

Now if I switch this, and in the database, the database is created from a form that these foreign entities fill out. And on the form, they can check what kind of interest they hold. And so they can check if they are buying it or if they're a partial owner or if it's a lease. And so we sorted it off by just the leased farmland. And what we found again is that Canada is also the largest lease holder in the US.

So what about this whole leasing thing? If you look at these maps, they're created to visualize the changes over time. And you can see owned versus leased. And what I want you to notice is that on the right-hand side, the lease side, it's really gone from very little in 2000 to much more significant in 2020.

So the leasing phenomenon is more of a recent situation. And that's playing into also looking at-- visualizing it a little bit differently, is looking at cropland on the right, the majority in red is cropland leases versus cropland purchases in each of these years. So leasing is becoming a very popular way for these foreign entities to acquire land.

Wendong already showed you this slide, but I will say that he and I were just two weeks ago at the American Society of Farm Managers and Rural Appraisers Meeting, and they have a small trade show associated with that meeting. And so I was walking around the trade show getting free stuff for my kids because I'm too cheap to buy them anything when I go on a trip.

And so I stopped by the-- by one booth that was a couple of gentlemen and I said, well, what are you doing here? And they said, well, we're here to either purchase or lease land for wind energy development. I said, oh, well where are you from? And I looked behind, it said BP. And they're like, well, our home office is in London. I'm like, you're a perfect example of what it is we think is going on, which is this out-of-country businesses wanting to invest in the United States and they're looking at buying or leasing in order to develop that wind energy.

So here again is just another way of looking at who owns or holds land in the United States and who they are based on-- now Wendong, this is from New York State's list of adversaries, is that correct? Yeah, OK. So according to New York, these are our adversaries versus our allies. And you can see China, Venezuela, Iran, Cuba, and Russia hold very little farmland in the US.

But let's talk about China for a moment. Their investment in the United States was very low and stable for many years from 2000 through about 2012. And then in 2013, it jumped up. Anybody know what happened in 2013 with regard to China? They bought Smithfield, yes. So their purchase of Smithfield Foods allowed them to acquire the subsidiary Murphy Brown and all of their land holdings in various states across the US, and so that was a big jump-up for them.

The other jump-up is also in 2017, '18, and '19, and that's where some of this purchasing in Texas is going on, again, for wind energy. So slightly less than 1% of foreign-held acres. So if you put out the numbers, 352,000, it's a big number, but if you put it in perspective of the pie, it's a very small number.

OK, I'm going to take a few moments to talk about a little bit of research that Wendong and I are doing, because we have this AFIDA Database, and Wendong has some very good data on land sales in the Midwest, can we make some comparisons between the land that was purchased by foreign entities and the land that was purchased by domestic entities? And can we determine whether or not there's some systematic differences between those two in either the price paid per acre or other characteristics? And what I'm going to focus on today is on the price paid per acre.

So again, we FOIAed the data from the Farm Service Agency. We have the AFIDA data from 1978 to 2020, but we are only going to focus on 11 states in the Midwest and Great Plains. And those are the states that we have domestic sales for that we can make comparisons to the foreign sales.

So the domestic sales were collected from two sources, individual county assessor's offices and a private company. And they're for the years 2015 through 2020. So the comparison we're going to make is just for that five year span that's relatively recent. So we're not going to go back as far as the AFIDA data is able to go, but it gives us more recent information.

So as you would expect, there's 50 to 100 times more domestic sales than there are foreign sales. So if we put it all in the same bucket and try to make a comparison, all those domestic sales are just going to swamp out the foreign sales. And so what we did was as a matching technique that I likened to what appraisers do when they go and they find comparable sales.

So we tried to match to comparable domestic sales in terms of size and location and cropland mix. And we wanted to try to compare apples to apples. So this is what we found in terms of just looking at averages of the data, and I'll put it into an economic model here in just a moment and show you those results as well, but the foreign price per acre was slightly higher than domestic price paid per acre. And the other thing that's very noticeable is the average parcel size was considerably larger. But if you think about wind development or solar development, you want a bigger tract of land, so that makes some sense.

So here's my highly technical slide. And all it is saying that the price per acre is influenced by things like the size of the parcel the percent of tillable acres, whether or not it was a foreign buyer or not-- that's something we're going to test. And then where it's located in the county and then the year in which it was sold.

And so we did that regression, and I want you to focus on that 13.7%. And that's the difference between a parcel that was sold to a foreign buyer and the parcel that was sold to a domestic buyer in our area over the time period that we looked at. So foreign buyers in the Midwest appear, when they buy a parcel, to be paying 13.9% premium.

Now I want to stop here and remember that we're not talking about large swaths of land. So does this mean that they are driving the overall land market? No. This just simply means that for the individual parcels that they are buying, when they participate in the market, they are paying a slight premium. Now, as a researcher, I want to know whether or not this makes economic sense and if anybody else has found something similar. So we looked to the literature and we saw a couple of papers, one from Eastern Germany where they showed that farmers have a better knowledge of the local land market conditions, and they can secure land at lower prices than non-local buyers. So they were comparing non-local buyers with local buyers and finding that those local buyers-- or non-local buyers were also paying a premium. And then in the Czech Republic, they found that non-agricultural buyers, which would be considered the non-local or the foreign-- bid relatively high prices in an attempt to break down local relationships between agricultural buyers and local sellers. So there is some comparison, although it's not direct, but it's similar in terms of the results that we found.

So what we have for conclusions is that leasing is a common way to acquire land in the US, especially cropland. If you're on the Timberland side, that is still mostly being purchased as opposed to leased. Many foreign investors are motivated to develop wind and solar rights.

How did we know that? Well, to be specific, the name of the company that bought the land is listed in the AFIDA Database. When you go in and look at the name of the company and it has the word "wind" or "solar" in it, that's a pretty good clue that they're probably in energy development. So that's how we-- that was one of our clues.

And then limits on demand for farmland may adversely affect the price paid for land in local areas. But I'm not going to say that it's going to have an overall impact on the US ag land market. And again, the purpose of this research is to inform the policymaking process with what we hope is just objective information that can be used. So I will take questions. Yes, sir?

AUDIENCE: In one of those slides that showed foreign ownership historically and then more recently, one of the ones that seemed to have a huge increase more recently was the Cayman Islands. I'm assuming that's just a block or something. Do you have any idea how that would break up between adversaries and allies? I think I could guess.

MYKEL TAYLOR: I have my suspicions, but I cannot say for sure because that's the only thing listed on the form, is that that entity is based in the Cayman Islands. It's a good point. Your eyes are also very good, I would say. Yes, sir?

AUDIENCE: When you compared the foreign purchases versus domestic purchases and you showed like a 13.7% premium on there, did you look at the land classification or maybe compare the sales data with, for example, a farm that had wind towers on it compared to a domestic purchaser? Because I would think that maybe a domestic purchaser, even if they're an investment firm, may be looking for the same return. So if they're truly a-- did you guys go to that level of detail?

MYKEL TAYLOR: So we could only go to the level of detail that the AFIDA Database records. And one of the problems is that-- and it's always a problem with land value data, is we never know what exactly they're going to do with it. We never know their intentions.

So we did have ability to say it's 60% cropland, 40% pasture. We did have that kind of information on the breakdown, but we didn't have any other further information on whether or not a wind tower existed on that parcel or it had the potential for wind. But we-- do you want to add to that?

WENDONG ZHANG: We do not the exact location of the AFIDA land purchases, so we cannot link with a lot of the spatial characteristics we would like to control. So what we can do is we would use the county and year dummies to control for something that is inherent with those broader location, but we don't have information-- so for example, we don't the soil productivity index, we don't the proximity to transmission lines and things like that. Right.

MYKEL TAYLOR: Yes, sir?

AUDIENCE: Georgie Schmidt from Munich, Germany buys a farm in Wisconsin. Is he considered--

MYKEL TAYLOR: Yeah, foreign citizens and businesses would be considered-- would be included under AFIDA. Yes, sir?

AUDIENCE: Did you have any discussion-- I know that the land ownership is-- that garners the headlines and actually is small, minor part, especially when you're within 12 miles of an Air Force Base in North Dakota.

MYKEL TAYLOR: Yes.

WENDONG ZHANG: But did you have any discussion on controlling the means of production from the processing plant to the vertical contracts? You mentioned Smithfield and that ownership is concentrated in Missouri where most of their multiplier units, most of [INAUDIBLE] units are located.

MYKEL TAYLOR: Mm-hmm.

AUDIENCE: But the control, you look like a typical Midwest site, would be two 2,000 head buildings, it's going to finish 8 to 10,000 head of hogs a year. Takes about 2,000 acres of corn to support it. That's where the real control is, is that whole production line. Not necessarily the ownership of that site or that plant, but that whole means of production. And I think that's really where the food security issue should be addressing.

MYKEL TAYLOR: I agree with you and I don't necessarily have a good answer for you in that we know the county in which the parcel was located, but we don't know if they-- we don't know, for example, oh, they bought three neighboring parcels and that allows them to vertically integrate what they're doing. We don't have that type of--

AUDIENCE: Like a 10 3-acre parcel or something.

MYKEL TAYLOR: We don't know that. But I think that there is a bigger question. One of the motivators for paying attention to this issue that has been put forward in the media and by politicians is the food security aspect of it. And we're just talking about such a small proportion of the overall land base that it's hard to imagine that that's going to have a huge impact on our ability to produce food.

And I think that's important to remember, is that these numbers, when they're put in perspective, they're small numbers. And that's just something that I want to emphasize.

WENDONG ZHANG: To add on to Glenn's question, if you want to know, for example, the Chinese investment in the related industries, American Enterprise Institute has China Global Investment Tracker that track Chinese investment in the US and globally in all sorts of sectors. So there is a possibility to look into what sort of industry that China is buying, but it's-- the database only includes information about China, but not the other countries.

AUDIENCE: And don't get me wrong, those vertical contracts provide an inroad a lot of times for young and beginning farmers coming back the operation of guaranteed cash flow, but my question is ultimately who controls that food distribution.

MYKEL TAYLOR: Yes, sir?

AUDIENCE: So a question from Canada the country and not the owner.

MYKEL TAYLOR: OK.

AUDIENCE: We've seen efforts like with the Farmland Security Act of 2022 and then 2023 to so-called-- like increase the scrutiny around foreign ownership of ag land coming from Senators Baldwin and Grassley. And that included the assertion that the data-- and presumably this is the USDA data-- is incomplete and inaccurate. And I just wonder if you would agree with that assertion, and if so, like how incomplete and inaccurate is it?

MYKEL TAYLOR: OK. So I don't have an opinion on its accuracy in that it's hard when you're in something to be able to say, well, this is the truth over here and this is how far away from the truth it is. Like, I can't say that. Would I like to see more information gathered as a researcher? Absolutely because then I could make more definitive statements about what they're going to use it for and what that might do to the local economy and things like that.

So gathering more information would be great. I always tell my farmers, I'm like, FSA has a few other things on their plate besides tracking down foreign investors. So if you want to give more resources to FSA, sure. And maybe we can collect some more information. But I don't know that the information that's being provided is necessarily inaccurate, and I don't how you know to say that.

AUDIENCE: Right. OK.

DAVID OPPEDAHL: So I guess a follow-on is how many times has the USDA actually find people for not reporting they have ownership of foreign land? And are they able to for someone that's overseas?

MYKEL TAYLOR: I've seen some stuff on the internet, but I don't have an answer to your question. Do you want to--

WENDONG ZHANG: So if you're looking at the AFIDA report, the last few pages have the list of tables that the companies and owners who fail to comply with the AFIDA requirements. And they have shown that the date of penalty and the amount of the penalty. So USDA does track these records. And so there are some information related to that question.

AUDIENCE: One, would you guess that US citizens and interests own more farmland outside the US than foreign interests own inside the US?

MYKEL TAYLOR: It's quite possible.

AUDIENCE: Quite likely, actually.

MYKEL TAYLOR: I mean, when you think about-- I know farmers in Kansas that own land in Brazil for diversifying their operations.

AUDIENCE: Brazil, Australia, Eastern Europe.

MYKEL TAYLOR: Yeah. So--

AUDIENCE: Canada is a little more complicated because the three middle territories restrict it to some degree.

MYKEL TAYLOR: Yes.

AUDIENCE: But would you really consider BP to be a foreign owner? If there's a multinational, it's hard to really-- just because of headquarters, describe BP as a purely foreign--

MYKEL TAYLOR: There's a set of steps that you follow to determine if you're foreign depending on the shareholders and percentage and things like that. So that was just-- that was my example, Bruce. It was supposed to work. Oh, yes.

AUDIENCE: At the beginning, you talked about statutes on the state level for foreign ownership in different states. Since we're on the cusp of a new Farm Bill, do you have any predictions of if that will get woven in there? Potentially of foreign ownership?

MYKEL TAYLOR: What-- I don't know. But the one that I think might get woven in there because I think a lot of people agree about it is putting the Secretary of Ag on CFIUS, which is the Committee for Foreign Investment in the US. Because they consider-- that committee considers purchases of US assets, and if there's no ag representation, then it's hard to make the argument that we're paying attention to that sector.

So I could see that being something that either in the Farm Bill or some other way gets passed because there was a mention of the corn processing facility in Grand Forks, North Dakota, and that it's also, what, 20 miles from a US Air Base. So there's some conflicting interests that want to have a say in whether or not that goes forward.

AUDIENCE: So Mykel, on that point, I'm sorry to be such a common commenter here, but USDA, in response to that, is considering and doing a formal process of reviewing AFIDA in response to the question about whether it should be in the Farm Bill. So that's the compensating responses.

Yeah, we'll look at this and change the reporting entity rule because it's a two-layer look-through and they'll go to a three-layer look-through and then clean up some of the things like owning stock in a foreign company that owns land in the US. Like I'm technically a foreign owner of farmland in the US because of a small interest in a Canadian company that has stock sales in the US that owns land in the US.

So those kind of cleanups have to happen at some point to get an accurate answer to who owns what where. And that's the Farm Bill trade-off this year.

MYKEL TAYLOR: Thank you, Bruce. All right.

WENDONG ZHANG: And to add on to the policy discussion, I think one of the proposals, for example, we have seen at a federal level, I think Senator Grassley is proposing a legislation that makes the foreign entities report five-year leaseholds as opposed to 10-year leaseholds. Not sure whether-- like for wind and solar, that doesn't make a whole lot of difference, but there are potential some efforts at the federal level that consider what needs to be reported as well.

Related to the AFIDA data transaction, if, for example, a Canadian company has a joint venture with the Chinese company, they buy or lease US farmland, typically in a data we only see one data point, so we have very little information for these complicated ownership structures. So there is some discussion at least for certain states looking into if a foreign entity owned like a very tiny share of the ownership rights, then you also have to report and there's potential multiple records for one transaction, the clear breakdown of entities, and things like that.

So currently, there are some efforts at the federal and state level related to how the AFIDA disclosure form needs to be changed and things like that.

MYKEL TAYLOR: I'll just say that I gave this presentation a while back and there was a gentleman in the room who was older than me. And he said, I remember when AFIDA was passed and we were worried about the Japanese. So these things cycle. And we'll do some things with regard to AFIDA right now, but then it may quiet down for a while and then it may cycle again. So it's just good to have that historical perspective. But thank you for your questions. I appreciate it. David, are we--

DAVID OPPEDAHL: Thank you [INAUDIBLE].

MYKEL TAYLOR: OK.

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