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China is buying up American farms. Washington wants to crack down.
Bipartisan pressure is building to stop foreign nationals from purchasing American farm operations and receiving taxpayer subsidies.
The push to stop China’s influence in the U.S. economy has reached America’s farm country, as congressional lawmakers from both parties are looking at measures to crack down on foreign purchases of prime agricultural real estate.
House lawmakers recently advanced legislation to that effect, warning that China’s presence in the American food system poses a national security risk. And key Senate lawmakers have already shown interest in efforts to keep American farms in American hands.
The debate over farm ownership comes amid broader efforts by Congress and the Biden administration to curb the nation’s economic reliance on China, especially in key industries like food, semiconductors and minerals deemed crucial to the supply chain.
The call for tighter limits on who owns America’s farms has come from a wide range of political leaders, from former Vice President Mike Pence to Sen. Elizabeth Warren (D-Mass.), after gaining momentum in farm states.
“America cannot allow China to control our food supply,” Pence said recently during a speech at the conservative Heritage Foundation, urging President Joe Biden and Congress to “end all farm subsidies for land owned by foreign nationals.”
Chinese firms have expanded their presence in American agriculture over the last decade by snapping up farmland and purchasing major agribusinesses, like pork processing giant Smithfield Foods.
By the start of 2020, Chinese owners controlled about 192,000 agricultural acres in the U.S., worth $1.9 billion, including land used for farming, ranching and forestry, according to the Agriculture Department.
Still, that’s less than farmland owned by people from other nations like Canada and European countries, which account for millions of acres each. It’s also a small percentage of the nearly 900 million acres of total American farmland.
But it’s the trend of increasing purchases and the buyers’ potential connections to the Chinese government that have lawmakers spooked.
USDA reported in 2018 that China’s agricultural investments in other nations had grown more than tenfold since 2009.
The Communist Party has actively supported investments in foreign agriculture as part of its “One Belt One Road” economic development plans, aiming to control a greater piece of China’s food supply chain.
“The current trend in the U.S. is leading us toward the creation of a Chinese-owned agricultural land monopoly,” Rep. Dan Newhouse (R-Wash.) warned during a recent House Appropriations hearing.
The committee unexpectedly adopted Newhouse’s amendment to the Agriculture-FDA spending bill (H.R. 4356 (117)) that would block any new agricultural purchases by companies that are wholly or partly controlled by the Chinese government and bar Chinese-owned farms from tapping federal support programs.
That move followed a contentious debate over the potential consequences for Asian Americans if Congress adopted a provision aimed squarely at China.
In other words, if you are going to restrict China you should restrict other countries, like Canada, as well.
The legislation is expected to reach the House floor before the end of July, as part of a broader appropriations package, although the Senate has not yet drafted its own version of the spending bill.
Scrutiny of foreign-owned agricultural operations receiving taxpayer subsidies has also been rising in recent years after meatpacking conglomerates like the U.S. subsidiary of Brazilian-owned JBS received millions of dollars under the Trump administration’s trade bailout starting in 2018.
Smithfield was also in line to receive money from the program, which was created to help U.S. farmers hurt by trade retaliation from China and other competitors.
But the company backed out of its contract with USDA after an outcry from lawmakers led by Sen. Chuck Grassley (R-Iowa).
The renewed focus on curbing foreign farm purchases comes as Biden and Agriculture Secretary Tom Vilsack roll out a series of actions to bolster the food supply chain, following major disruptions caused by the pandemic.
That effort includes greater scrutiny of large meat processing companies like JBS (used to be Swift & Co.) and Smithfield, as well as plans to tighten the requirements for meat to be labeled a “Product of the USA.”
While lawmakers remain focused on Chinese buyers, other nationals own much more agricultural property in the United States.
Foreign investors by the end of 2019 held an interest in more than 35 million acres — an area bigger than New York State.
The total has grown by an average 2.3 million acres per year since 2015, according to USDA data.
A few states, including top agricultural centers like Iowa and Minnesota, already have varying restrictions on foreign ownership of their farmland.
Those seeking more restrictions say USDA’s numbers actually understate the amount of foreign control over American ag operations.
The data is based on a 1978 law directing foreign nationals to report their U.S. agricultural holdings to USDA — a requirement that can be difficult for the department to enforce.
For example, foreign investors can set up limited liability companies in the U.S. and designate an American owner to circumvent the reporting requirements while still controlling the operation behind the scenes, said Joe Maxwell, president of the progressive advocacy group Family Farm Action.
“It’s a massive undertaking to verify who really owns [the land],” Maxwell said. “These foreign interests are pretty smart. They use different business structures to further conceal it.”
While some states have strict laws in place, others are more open to foreign investments. Texas has the largest amount of foreign-held agricultural land, at 4.4 million acres, followed by Maine and Alabama, according to USDA.
The money flowing into agricultural real estate from other countries also makes it difficult for new farmers in the U.S. to afford land as outside buyers bid up prices. Maxwell said that poses a big risk with an older generation of farmers set to exit the industry.
“When this land changes hands, they’re going to gobble it up,” he said of foreign buyers. “These investments artificially increase the value of that land, which then denies young and beginning farmers opportunities to farm.”
Foreign Purchases of U.S. Agricultural Land: Facts, Figures, and an Assessment of Real Threats
September 8, 2021
Center for Strategic and International Studies
Jamie Lutz is a research associate with the Global Food Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
Caitlin Welsh is the director of the CSIS Global Food Security Program.
Foreign ownership of U.S. agricultural land doubled from 2009 to 2019, according to U.S. Department of Agriculture (USDA) records, and policymakers have become increasingly concerned about foreign control of the U.S. food supply.
Q1: Where and why are foreign entities purchasing farmland in the United States?
A1: USDA records provide the best source of information on foreign-held agricultural land, although they are still incomplete and contain many errors
According to USDA data, foreign investors owned at least 35.2 million acres of U.S. agricultural land in 2019—2.7 percent of U.S. farmland, an area almost the size of Iowa.
While foreign land ownership has been reported in all 50 states and Puerto Rico, the holdings are concentrated in particular states.
The greatest share is in Texas, with over 4.4 million acres, followed by Maine (3.3 million acres) and Alabama (1.8 million acres). Over 40 percent of the additional 3.4 million acres acquired by foreign investors in 2019 was located in Texas, Oklahoma, and Colorado.
Canadian investors hold the largest share of this land, at 29 percent, with the Netherlands, Italy, Germany, and the United Kingdom collectively owning another 33 percent.
The remaining 38 percent is held by entities from almost a hundred other countries.
Although Congress has become increasingly concerned about Chinese land purchases, investors from China currently own only a small fraction of this land, at 191,652 acres (0.05 percent of the total).
In 2019, 49 percent of reported foreign-held acreage in the United States was forest land, while 25 percent was crop land, 24 percent was for pasture and other agricultural uses, and 2 percent was for non-agricultural uses (such as homesteads and roads).
The USDA reports that the changes in pasture and crop land holdings since 2009 were mostly due to foreign-owned wind companies signing or terminating long-term leases.
Q2: What threats do foreign acquisitions of U.S. farmland pose?
A2: On a large scale, these acquisitions do not represent a substantial enough portion of food production in the United States to threaten national food security.
The United States currently produces more than enough food per capita, even after adjusting for food waste. Food insecurity among U.S. families is primarily driven by poverty, not a lack of food.
U.S.-based companies also own over nine million acres in other countries.
Even so, large land purchases present various localized concerns in the places where they occur. For example, in water-scarce regions like the Southwest, outside use of freshwater resources can affect water availability for local farms and communities.
Arizona, for instance, has no rules on groundwater pumping as long as it is for a “beneficial use,” which includes agriculture even if the products are shipped elsewhere.
Near a 10,000-acre hay farm run by a Saudi subsidiary, local residents say their wells are going dry.
It is not only foreign companies who take advantage of this regulatory loophole, however—companies from other states and cities around the United States are also buying up land in Arizona to take advantage of the state’s loose water regulations, putting Arizona’s long-term water resources at risk.
Across the country, the 2013 purchase of Smithfield Foods by the Chinese firm Shuanghui, now called WH Group, received national attention and escalated concerns about Chinese intervention in U.S. food systems.
The deal meant that WH Group now owns the largest pork producer in the United States as well as over 146,000 acres of Missouri farmland.
Missouri had formerly banned all foreign ownership of agricultural land in the state, but one week before Shuanghui took over Smithfield, that rule changed to allow foreign entities to own up to 1 percent of the state’s farmland.
Critics claim that the rule change was instrumental in allowing the deal to go through as written, and some members of Congress warned of Chinese government involvement in the purchase. Smithfield is vertically integrated and owns all aspects of its supply chain, meaning that WH Group now controls a significant portion of U.S. pork production and revenue in addition to farmland.
While a large portion of Smithfield pork was already being exported to China prior to the acquisition, the Covid-19 crisis raised concerns about Chinese control of U.S. food supply chains.
When the pandemic hit, Smithfield increased pork exports to China even as the United States experienced widespread meat shortages due to supply chain disruptions and Smithfield closed some of its plants due to poor working conditions.
This series of events prompted Congress to look at how to prevent Chinese ownership in U.S. agriculture, even though other foreign entities, like Brazilian-owned JBS (Swift & Co.), control similarly large portions of U.S. food supply chains.
Q3: What regulations are currently in place?
A3: The only federal law governing these transactions is the Agricultural Foreign Investment Disclosure Act (AFIDA) of 1978.
The AFIDA requires foreign entities to report transactions of farmland to the USDA and imposes steep penalties for failing to report (up to 25 percent of the fair market value of the land), although they are rarely enforced—the last fine imposed under the act was in 2014.
The USDA claims that its goal is to monitor foreign ownership of land, not to exact penalties. Given the state of the AFIDA data, it seems it is doing neither. The data is entirely reliant on self-reporting, and the USDA does not check it for completeness and accuracy, so there are frequent typos, omissions, and outdated information.
As a result, the public does not have a complete picture of which foreign entities own how much U.S. farmland or what the land is being used for.
On the state level, regulations vary. Most states, like Texas and Maine, have no restrictions on foreign ownership of land, contributing to the large amount of farmland that is under foreign control in these states.
Six states forbid any foreign landholdings, and some, like Missouri, put caps on how much land can be held by foreign entities.
Q4: What federal solutions are being discussed?
A4: Since the 2013 purchase of Smithfield Foods, multiple bills have been proposed to provide more oversight of foreign investments in U.S. agricultural companies, but until recently they each died in committee.
Even if these bills had passed, they would have strengthened oversight on purchases of U.S. companies, not agricultural land specifically, leaving most land acquisitions unregulated.
Furthermore, policymakers have signaled no efforts to improve state- or national-level information on foreign purchases of U.S. farmland, leaving the true picture obscured.
In the wake of Covid-19 supply chain disruptions and escalating tensions with China, U.S. lawmakers have specifically increased scrutiny of purchases by Chinese investors.
Citing national security concerns, the House Appropriations Committee included an amendment in the recent Department of Agriculture-Food and Drug Administration spending bill that prohibits the purchase of agricultural land located in the United States by Chinese-owned companies.
Representative Grace Meng expressed concern that the amendment could fuel already rising anti-Asian hate, and the USDA and advocacy groups have pointed out that the USDA does not have the authority to intervene in private land deals.
The USDA could enforce the portion of the bill that bans Chinese-owned companies from participating in federal benefits programs, but constitutionally, land purchasing falls under states’ rights, and legislators have made no motions to change that.
The House passed the agriculture appropriations bill on July 29, raising questions about how it will be enforced if it becomes law.
Q5: What is the real threat to U.S. food security?
A5: Land grabbing is more of an immediate threat to food security in other parts of the world than it is in the United States, but it could become a greater threat in the future if more farmland is sold and if foreign investors continue to buy available farmland.
The U.S. farmer population is aging, with an average age of 57.5 in 2017, up from 55 in 2012. The National Young Farmers Coalition (NYFC) anticipates that two-thirds of farmland will change hands over the next decade as farmers retire, meaning that more land could become available for foreign purchase.
It is important to note that foreign entities are not the only ones aggressively buying up U.S. farmland. Many large corporations, pension funds, and wealthy individuals are investing in agricultural land in the United States and abroad.
Advocacy groups like the National Family Farm Coalition argue that the larger threat to national security is corporate capture of U.S. land resources, whether those corporations are U.S.- or foreign-owned.
The NYFC also points to both urban and rural development as a threat to the future of U.S. farms, since converting farmland to other uses drives up prices and makes the land unaffordable for beginning farmers.
For long-term U.S. food security, perhaps the larger concern is why up-and-coming U.S. farmers are unable to buy the land they need.
According to the NYFC, young and aspiring farmers say access to land is their largest barrier to starting a successful farm business. With an aging U.S. farmer population and not enough new farmers able to enter the industry, more land will inevitably be converted to other uses or sold to foreign and domestic investors unless policies are put in place to support the next generation of farmers.
Focusing narrowly on land purchases by Chinese companies or other foreign entities will not address the full scope of this problem.
Policymakers should, instead, consider the many threats facing the future of the U.S. food system and ensure that current and aspiring farmers have the resources they need to secure long-term U.S. food production, starting with access to affordable farmland.
In addition to federal action, some states, like Arizona, could do more to protect their local resources and communities from exploitation by domestic and foreign entities.
For its part, China owned 191,000 acres worth $1.9 billion as of 2019. This might not sound like a lot, but Chinese ownership of American farmland has exploded dramatically over the last decade.
Indeed, there has been a tenfold expansion of Chinese ownership of farmland in the United States in less than a decade.
Six states — Hawaii, Iowa, Minnesota, Mississippi, North Dakota and Oklahoma — currently ban foreign ownership of farmland.
Massive Chinese investment in American farmland is troubling for one very obvious reason: It puts the food security of the nation in the hands of a hostile foreign power.
But there is also the social cost of allowing foreign buyers who have effectively unlimited resources to compete on the real estate market with smaller domestic buyers.
So, the real victims of all this are smaller landholders and our next generation of farmers.
So, what do you think? We have already seen the impact of depending on the Chinese for all sorts of manufactured good and technology, should we now let them invest in our food supply?
What about all of the other countries who are investing in our farms. Should they be banned as well?