Global Droughts And Development Have Dwindling U.S. Farmland Fighting For Survival

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In its report “Farms Under Threat: The State of the States,” the American Farmland Trust estimates an average of 2,000 acres of farmland are converted daily to property used for housing and retail commerce. In other words, that land won’t be growing crops anymore.

The Farm and Land in Farms report from the United States Department of Agriculture (USDA) show the U.S. lost 1.3 million acres of farmland in 2021, from 896.6 million acres in 2020 to 895.3 million in 2021. Farmland acreage has decreased by over 13.62 million acres since 2014, an average loss of over 1.9 million acres per year.

The loss of farmland can be attributed to a number of factors — none of them good. Agricultural land being converted into new developments has been targeted as one of the leading causes of the shrinking farmland acreage supply. Farmland is a hot commodity as developers look to expand suburbs by building new housing and apartment developments to meet increasing housing needs.

Drought Plagued, Sun Parched and a Big Problem for Farmers

Lack of water, brutal heat and other climate issues are plaguing an industry wholly dependent on weather conditions. In parts of the Midwest this year, some corn crops are so burned by the heat that stalks are barren of ears. Grain and soybean pods are also fewer and smaller than usual. 

The timing couldn’t be worse. Russia’s war with Ukraine contributes to the mad dash to replenish grain reserves as trade is disrupted in the Black Sea. 

In the U.S., corn is the most dominant crop, and the sun-parched harvest will significantly affect the global food supply, adding more pressure on South America to produce replacement bumper crops. That situation is exacerbated by China’s worst drought since the 1960s, forcing the country to import grain to feed its massive livestock herds and shore up domestic inventories.

Concerns About Chinese Investment

According to some reports, Chinese investors are acquiring prime U.S. farmland to gain control over agribusiness ventures. North Dakota has been the most visible example, with local alarms sounding in Grand Forks when a Chinese-backed investment firm purchased 300 acres 20 minutes from the Grand Forks Air Force Base, a 5,773-acre Global Hawk base. Not only does the land grab eliminate local ownership, but the Chinese group also wants to develop the corn mill, which is drawing national security concerns because of its proximity to the base. The deal is still pending approval.

New companies are popping up that are trying to help people regain and protect property for agricultural use. Arkansas-based AcreTrader is helping accredited investors buy equity in farmland through its online crowdfunding platform.

The AcreTrader platform has completed three full investment cycles in the last year with the disposition of three agricultural properties to the company’s investors. Annualized returns on these investments ranged from 15.4% to 30.3%.

AcreTrader believes that with a growing global population and shrinking U.S. farmland acreage, the laws of supply and demand clearly favor farmland investing. While the value of gold or stock markets has historically gone down over 40% or 50% in a single year, farmland returns have been positive every year since 1990. AcreTrader references this in its “Cumulative Returns of Major Asset Classes, Indexed to 1991."

Photo by meriç tuna on Unsplash

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Posted In: Real EstateAcreTraderAlternative investmentsFarmland
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