Limits on foreign ownership of U.S. farmland gain support in Congress, despite skepticism

Limits on foreign ownership of U.S. farmland gain support in Congress, despite skepticism
March 20th, 2023 | Adam Goldstein - Nebraska Examiner

WASHINGTON — Bipartisan momentum is building in Congress to restrict China and other foreign adversaries from purchasing U.S. farmland, a reflection of a similar push by some states as well as apprehension over Chinese spy balloons, rising land prices and growing international competition. 

“Foreign ownership of agricultural land threatens small family farms and the overall health of the agricultural supply chain,” wrote a bipartisan group of House lawmakers in a Feb. 27 letter to Agriculture Secretary Tom Vilsack, condemning the department’s insufficient foreign transaction reporting from 2015 to 2018. 

“I don’t think we should be allowing countries who don’t give a damn whether we exist or not to own land, whether it’s farmland or agribusiness, in this country,” said Democratic Sen. Jon Tester of Montana in a Feb. 28 Senate committee hearing.

“I believe that one acre of American farmland owned by the Chinese Communist Party is one acre too many,” said Republican Alabama Sen. Katie Britt in the same February hearing. 

And while policy and legal experts outside Congress believe a national restriction on foreign ownership could get passed this session, they also believe there could be challenges in its rollout, as well as unintended consequences for the agricultural community. 

John Schwarz, a row crop farmer and lawyer in Cass County, Indiana, questioned whether any national bill would be enforceable due to the sheer scope of farmland in the country. He suggested it may be better left to counties and localities to handle. 

“If this is going to work, it really has to be on a micro level,” Schwarz said. “I don’t think a macro level is going to do it because there’s just way too many ways to slip through, getting cute with the ownership and companies.”

Vilsack said in a Thursday Senate hearing that Russia, China, Iran, and North Korea together own under 400,000 acres of agricultural land as of 2021. He added that the nation’s largest foreign landholders include Canada, the Netherlands and the United Kingdom. 

The secretary expressed concern over how federal foreign ownership restrictions could be implemented in a way that was fair and legally sound for international investors. 

Clay Lowery, former assistant secretary for international affairs at the Department of the Treasury, also raised questions about a wide-reaching foreign ownership restriction at the Senate hearing in February. 

“I do believe strongly in the ability for countries and entities to invest in the United States, because I think that is actually a positive,” he said. 

Jennifer Zwagerman, director of the Drake University Agricultural Law Center in Iowa, said she understands that there are growing national security concerns over farmland. Yet she is concerned a federal ownership restriction could exacerbate problems with farmland loss, and provoke xenophobia across the country.    

“It’s easy to focus on one area of concern and one aspect,” Zwagerman said. “My bigger fear is that we limit groups or entities or individuals that are really interested in farming or production themselves. And in doing so, we end up with land that is purchased by those less interested in farming and more as development.”

Foreign land holdings

The USDA reports that foreign persons and entities held an interest in just over 40 million acres of U.S. agricultural land in 2021.

This number marked an increase of over 2.4 million acres from the Dec. 31, 2020, report, and the agency added that foreign land holdings have increased by an average of 2.2 million acres per year since 2015. 

Challenges persist with ownership transparency, outdated sales, and incomplete price information in the Agricultural Foreign Investment Disclosure Act. Gaps in this legislation — which facilitates USDA oversight of foreign transactions through the Farm Service Agency — make it unclear if more or less acreage is actually owned by foreign governments.

Regardless, at the USDA Agricultural Outlook Forum in late February, Micah Brown of the National Agricultural Law Center said momentum for foreign ownership bills is being fueled by shifting ownership trends and national security concerns. 

The Arkansas-based lawyer added that the current movement follows some farmland ownership “flash points” in American history dating back to the Revolutionary War.  

Schwarz said the current push is likely in response to the Chinese spy balloon event in early February, along with recent Chinese land purchases close to North Dakota and Texas Air Force bases over the last three years. 

Zwagerman said that another one of the “always-valid” concerns driving this issue is access to sufficient and adequate farmland for producers. Farmland prices have not declined by a significant margin since the late 1980s, according to the USDA Economic Research Service. 

In early February, Republican Sen. Mike Rounds of South Dakota introduced the PASS Act of 2023 with Tester, which would bar North Korea, Iran, China, and Russia from purchasing U.S. farmland. The bill would also add the USDA to the Committee on Foreign Investment in the United States, a multi-agency council that reviews financial transactions that affect national security. 

Rounds said in an interview with States Newsroom that he and his co-sponsor have “done their due diligence” in writing long-term legislation that protects its citizens, “the primary responsibility of the United States government.” 

“We’ve seen evidence of an attempt by China to purchase land near a very sensitive military installation,” Rounds said, referring to the North Dakota and Texas incidents. “That should be a heads-up that you address it before it becomes a problem, rather than waiting until it is a problem.”

Rounds added that another pressing issue is the intellectual property concern surrounding foreign ownership, in which China could reproduce high-yield seeds and pesticides while circumventing intellectual property law.

States limit foreign investments 

While there is no federal law that restricts foreign investors from acquiring agricultural land in the United States, 14 states currently have laws restricting foreign private investment in agricultural land. 

These states are Indiana, Iowa, Kentucky, Kansas, Minnesota, Mississippi, Missouri, Nebraska, North Dakota, Oklahoma, Pennsylvania, South Carolina, South Dakota, and Wisconsin. Virginia will be the 15th state to adopt a restriction in the coming days when Governor Glenn Youngkin is expected to sign S.B. 1438.  

Renée Johnson, an agricultural policy analyst with the Congressional Research Service, spoke at the February USDA Agricultural Outlook Forum about four categories of foreign farmland ownership restrictions that have gathered interest in the 117th and 118th Congress.

The first category of legislation Johnson identified was legislation which restricts foreign entities from accessing USDA-administered programs, like the Farm Credit for Americans Act introduced in 2022 by Republican Sen. Chuck Grassley of Iowa.  

Johnson noted that these bills, while popular, would be “extremely complicated” to do as a general restriction given there are many different USDA programs that have different constituents and requirements. 

Schwarz said he does not believe curbing access to USDA programs will reduce foreign investment, since the value of the farmland as an asset may outweigh the benefits of being eligible for voluntary programs. 

The second category Johnson identified was adding the Department of Agriculture to CFIUS, like in the FARM Act of 2023 introduced by Republican Sen. Tommy Tuberville of Alabama. This change would give the agriculture community a voice on the committee, which can request the president to block land sales it deems threatening to national security. 

Johnson said that Congress’ agriculture committees would not have the ability to pass the bill, as CFIUS is governed by the Treasury. Yet she noted that this change is feasible if advanced through the Senate Banking Committee. 

Lowery said in the February Senate hearing that he views adding the USDA to CFIUS as “totally reasonable.” 

Johnson added that the idea is worth keeping an eye on as it has gained bipartisan support.

Bans on foreign land purchases

A third category Johnson identified was sweeping bans on ag land purchases for “foreign adversaries,” such as in Rounds’ PASS Act. 

Johnson noted that these bills have much more to do with military infrastructure and conflict between the U.S. and the governments of China, Iran, Russia, and North Korea. 

Zwagerman said that while the federal government may have the right to restrict foreign ownership for national security reasons, passing the bill would require an “extreme set of circumstances with a lot of fighting.”

“There are concerns about already-owned foreign property, and that the government is taking its authority to regulate land ownership for security concerns too far,” she said.

Schwarz said that the Farm Service Agency and Natural Resources Conservation Service, which would likely be responsible for handling oversight on laws like these, may become “over-bloated programs” if this is done at the national level.  

Zwagerman added that she holds other concerns with discussions of these wide-reaching land ownership restrictions, especially the “isolationist aspect” she thinks it could pull the country towards.  

Rounds said concerns about this section of his bill are misplaced. 

“It is strictly based upon whether or not they have an affiliation with the government of those four countries,” Rounds said. “That’s pretty straightforward.”

A fourth category that Johnson identified is large-scale agricultural land ownership restrictions on China alone, as in the Prohibition of Agricultural Land for the People’s Republic of China Act introduced last session by Republican Rep. Dan Newhouse of Washington. 

Brown, in a National Agricultural Law Center webinar, said the broad language of some USDA program-related and foreign ownership restriction bills could affect many entities with looser ties to China. 

Johnson said that some members of the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party are concerned about fueling backlash against “certain Asian communities in the United States.”

“It’s concerning,” said Manjusha Kulkarni, executive director of AAPI Equity Alliance, of proposed restrictions in a message to States Newsroom. 

“Our elected leaders are responsible for ensuring we don’t pass or propose any laws that will do little good but cause real harm to Asian Americans.”

What Congress might consider

The evidence that prohibiting foreign farmland purchases would serve any national security or economic purpose is inconclusive. 

The Department of Agriculture could find “neither a consistent nor significant relationship” between foreign ownership and land values or rental rates. 

The Center for Strategic and International Studies also found that “these acquisitions do not represent a substantial enough portion of food production in the United States to threaten national food security.”

Still, a number of industry groups have publicly acknowledged support for restricting foreign farmland ownership, including the American Farm Bureau and Family Farm Action, an advocacy group for family-owned farms. 

Zwagerman said that when it comes to monitoring foreign investment through the USDA and FDA, it “sort of feels like that ship sailed.”

“There isn’t just a local, or even national, agriculture-and-food economy anymore,” she said. “Everything we have is already at an international level.”

Schwarz said he doubts anything will get done at the federal level on foreign ownership, but state or county taxing infrastructure could be a better way to monitor foreign farmland transactions.

Brown said at the Agricultural Outlook Forum that despite an uncertain outlook for a federal foreign ownership law, “something he’s been thinking about” is the prospect of a random audit system for foreign transactions monitored by the USDA. 

He added that the Farm Service Administration already does randomized audits with participants in its other programs, like crop insurance. 

Zwagerman said she thinks the energy being given to this issue may be better spent on encouraging the next generation of producers, and keeping land in production. 

From 2001 through 2016, the U.S. converted more than 11 million acres of agricultural land to other uses, according to the American Farmland Trust. 

“I would rather have more of a consideration or discussion about how we just keep farmland, as a whole,” Zwagerman said. “That’s a bigger concern.”

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