American soil popular with investors

A third of American farmland is owned by investors and that trend is continuing at a rapid pace. Chinese investors in particular are buying plenty of farmland in the United States (US). It is not good for the soil quality. This is according to figures from the United States Department of Agriculture (USDA). 

The rising land price has made more and more companies interested in investing in American land. Not only farmers, but also investors flock to the US. At least 30% of US farmland is owned by investment funds. 

Farmers in the US have an average age of 55 years. It is expected that, by that age, another 5 million hectares will be transferred to other owners in the next 92 years. These are mainly investors and not farmers.

China manages a lot of land
USDA figures show that more than 10 million hectares, of the total number (372 million), are in the hands of foreign investors. That's about 2% of the total.

An example is Saudi Arabia. That country has purchased more than 6.000 acres in Arizona and Southern California for the production of animal feed. Italy bought 40.000 hectares and New Zealand 7.200 hectares. China even manages 400 American farms with approximately 40.000 hectares of farmland. 

Agricultural land high yield
Low interest rates have led to more investment in the land. And agricultural land is then a good investment to spread risk. Land investors expect to receive high returns. Unlike farmers, they can more easily purchase land in different regions. After all, they can lease this in turn to regional farmers.

In the past 20 years, fuel production has seen the same growth as the price of land. As exports of these fuels to China and other countries grow, so do commodity prices and farmers' incomes. This makes investors 'hungry' for agricultural land and the price of land rises. 

Declining soil quality
The above sounds appealing to the farmers who are ending their business and want to sell the land. However, for the durability of the soil it also has its drawbacks. Investors have little interest in soil fertility, water availability and other soil properties. As a result, the quality of the soil is rapidly decreasing. In practice, it appears that good stewardship only comes from landowners, who are also farmers.

It is more difficult for young farmers to have access to land. Getting good and affordable farmland is the biggest challenge for a young farmer in the United States. The trend that land is increasingly in the hands of investors is driving the price up considerably.

Explosive rise in the price of land
The ground under the feet of farmers has increased in value in recent years. In 1970 the price was still $1.750 per hectare. In 2016, that rose to nearly $7.500 per hectare. That's an increase of 400%. Due to the falling food prices, there is a slight decrease after 2013. Daling to be seen in the prices.                                                        This graph shows an increasing trend in land prices.
Source: USDA

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