Investment funds stocking up on US farmland in safe-haven bet

Investment Funds Acquiring U.S. Farmland to Achieve Sustainable Development Goals

Nov 16 (Reuters) – Investment funds have become voracious buyers of U.S. farmland, amassing over a million acres as they seek a hedge against inflation and aim to benefit from the growing global demand for food, according to data reviewed by Reuters and interviews with fund executives.

The Impact of Investment Funds on U.S. Farmland

• Investment funds have acquired over a million acres of U.S. farmland.
• The trend has raised concerns among lawmakers who fear that corporate interest will make agricultural land unaffordable for the next generation of farmers.
• A bill has been proposed in Congress to impose restrictions on the industry’s purchases.

Growth of Investment Firm Acquisitions

• Since the 2008 global financial crisis, investment firms like Manulife Investment Management and Nuveen have been acquiring farmland at an increasing pace.
• The number of properties owned by these firms has increased by 231% between 2008 and the second quarter of 2023.
• The value of their holdings has risen more than 800% to around $16.2 billion.

Sustainable Development Goals and Farmland Investment

Farmland offers steady returns even in periods of high inflation, making it an attractive investment for funds.

Investment firms are also motivated by the growing global demand for food, as the United Nations predicts a 60% increase in food demand by 2050 due to population growth.

Comparison with Foreign Farmland Purchases

Investment firm acquisitions of U.S. farmland are outpacing purchases by foreign entities.

Concerns and Proposed Legislation

• Lawmakers have debated whether to limit foreign farmland ownership to prevent political influence.
• The Senate has included a provision in the National Defense Authorization Act to ban farmland purchases by certain countries.
• The number of acres owned by foreign entities has increased by 64% between 2010 and 2021.

Extent of Investment Firm Ownership

Investment firms own approximately 1.65 million acres of U.S. farmland.

Impact on Young Farmers and Land Prices

• High land costs resulting from investment firm acquisitions are a hurdle for young and beginning farmers.
• The average price of an acre of cropland has reached a record high, making it difficult for the next generation to afford farmland.

Benefits of Farmland Investment for Investment Firms

• Investment firms view farmland as a resilient asset that offers stable returns, even during periods of inflation.
• Farmland is seen as a safe investment similar to gold.
• The NCREIF farmland index has averaged an 11.4% annual return over the past 25 years, outperforming the S&P 500 index.

Future Outlook and Policy Considerations

• Investment firms expect continued growth in the demand for food, which makes farmland an attractive investment.
• Policymakers are considering stricter guidelines on farmland purchases for the next farm bill.
• A bill has been introduced to curtail investment fund purchases and leases of farmland.

“IT’S LIKE GOLD”

Investment firms compare farmland to gold, highlighting its value as a hard asset that offers stability and limited downside risk.

Benefits of Farmland Investment for Sustainable Development Goals

• Farmland investment aligns with the Sustainable Development Goals by contributing to food security and economic growth.
• Investment firms see growth potential in farmland as the demand for food rises globally.

Despite concerns about the impact on land prices and the next generation

SDGs, Targets, and Indicators

SDGs Addressed in the Article:

1. SDG 2: Zero Hunger
2. SDG 8: Decent Work and Economic Growth
3. SDG 11: Sustainable Cities and Communities
4. SDG 15: Life on Land

Targets and Indicators:

• SDG 2: Zero Hunger
• Target 2.4: By 2030, ensure sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems, that strengthen capacity for adaptation to climate change, extreme weather, drought, flooding, and other disasters, and that progressively improve land and soil quality.
• Indicator: Increase in investment funds’ acquisitions of U.S. farmland as a response to the growing global demand for food.
• SDG 8: Decent Work and Economic Growth
• Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance, and financial services for all.
• Indicator: Investment funds becoming voracious buyers of U.S. farmland as a hedge against inflation and a new investment vehicle.
• SDG 11: Sustainable Cities and Communities
• Target 11.1: By 2030, ensure access for all to adequate, safe, and affordable housing and basic services and upgrade slums.
• Indicator: Increase in investment firm acquisitions of farmland, potentially leading to unaffordable agricultural land for the next generation of farmers.
• SDG 15: Life on Land
• Target 15.3: By 2030, combat desertification, restore degraded land and soil, including land affected by desertification, drought, and floods, and strive to achieve a land degradation-neutral world.
• Indicator: Increase in investment funds’ acquisitions of U.S. farmland as a result of the growing demand for food and the potential for steady returns.

Table: SDGs, Targets, and Indicators

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Source: reuters.com

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