When the farmland runs out.
INTRODUCTION
Sarah Mock: The first time I learned about “the little death,” I was so confused. I was a kid, reading The Carnivorous Carnival, a “Series of Unfortunate Events” book by Lemony Snicket. And he mentioned the French version of the phrase– La Petit Mort– which he defined as “a feeling like a part of you has died.”
But as a precocious adolescent, I thought I’d look it up myself to be sure, and I found out that “the little death” might literally meet that definition, but that it usually references the moment immediately after an orgasm when a person experiences a brief loss of consciousness or awareness of the world. As you can imagine, thirteen-year-old me was scandalized. I mean, also fascinated and titillated, but also scandalized.
So after finding out that a “little death” is a good thing, you can imagine my further confusion to learn that when someone has “bought the farm,” they’ve died. As a kid who grew up on a farm, I couldn’t make sense of why purchasing farmland would be comparable to a person’s demise– though it did help me connect the dots on why a dog or a horse gets “sent to a farm Upstate” when they’ve reached the end of their life.
So on the one hand, I learned about the idiom of the “death” of sex, on the other “farmland ownership” of death. In this syntactic equation, it felt like I could cancel out the deaths, and maybe create a new idiom, wherein having “bought the farm” is the sex metaphor, given the shared feeling of safety, satiation, and contented accomplishment that comes with both orgasm and, I imagine, property acquisition.
In that alternate reality, to declare that someone you know and love has “bought the farm” would be a cause for festivities rather than a funeral.
[MUSICAL INTERLUDE]
But in this reality, we do not often get to celebrate people having “bought the farm,”not figuratively, or even literally, because so few people literally get to do it these days. And it’s not just new and beginning farmers that struggle to buy farmland, it’s almost everyone else. With the possible exception being the rapidly growing group of institutional investors from the worlds of banking, insurance, private equity, and beyond, that have flocked to buying American farmland, especially since 2008. But the origins of modern farmland’s affordability crisis began way earlier than that, and can be traced pretty directly to the 1970s and ‘80s, a time during which farmland was transformed from the home of farmers into one of the world’s most rewarding and stable financial assets.
So today we’re going to explore the intersection of farmland and finance. We’ll follow one farmer on their journey to farmland ownership, as they reflect on the pleasure and pain of buying and caring for land, and we’ll gain a deeper understanding of how large-scale farmland investing earns your retirement account a good return, while making farmers vulnerable to the whims of speculators. Through all of this, I’ll be on the lookout for insight as to why “buying the farm” seems an obvious source of pleasure and satisfaction, but has instead become a symbol of loss and pain.
In other words– why do we dread having “bought the farm?”
That’s today on The Only Thing That Lasts. I’m Sarah Mock.
[MUSICAL INTERLUDE]
PART 1: The Farmland Gambit
SM: I want to start off by introducing you to Jackson Rolett. He’s a family farmer who’s lived and farmed most of his life in South Central Kentucky. He’s also a first generation farmer, and in many ways the exact kind of farmer that I think many dream about. He’s young and enthusiastic with a strong ethic around land and animal care. He’s a student of Wendell Berry and gets excited about growing healthy, organic food for his community, but he also needs to provide for his growing family, and wants to engage his children in the wonder of living close to the land.
Jackson’s farming career also, I think, reflects our collective aspiration that a person can start from anywhere, and through a combination of hardwork, grit, and entrepreneurial spirit, start a farming legacy.
Jackson realized he wanted to farm in college, and his journey to the land started as soon as he graduated. Without a farm in his own family to start on, he began the slow work of learning as a farm employee– first as an apprentice and then a farm manager while also working another job to make ends meet. After years of building skill, he was eventually able to bring together the money and confidence to lease land and start his own farm. And then, years of careful saving and planning later, he achieved the near impossible. He had the opportunity to buy his own farm, with the help of a USDA-backed beginning farmer loan.
Jackson Rolett: It was one of those moments when we signed the paperwork that we thought we just bought the place we are going to be buried in, it was 10 acres. It was close to neighbors that we knew it was plenty of room for us. The house– it wasn’t great, but it was a house. And we thought that this is where we are going to spend the rest of our life. We envision the grandkids coming back here to like the family farm, right?
SM: As we discussed last episode– actually achieving the dream of farm ownership is incredibly hard for young farmers, and for a number of reasons. A low volume of farmland for sale at any given time means prices are constantly rising. Plus there’s costly interest involved in financing farmland, and farmers who can’t pay cash need to make as much as a 50% down payment. In short, without a lot of money already in the bank, buying the farm often doesn’t pencil out.
And yet, Jackson and his family made it happen– they bought the farm. Literally.
But in the course of just a few years, things started to go sideways. Jackson’s high-value organic vegetables were repeatedly contaminated by herbicide drift from neighboring farms– devastating his crop and leaving what survived unsellable. When Jackson tried to address these issues with the adjacent landowners, most were unreceptive to changing anything about the way they were farming. And in a few cases, Jackson couldn’t even get ahold of the neighbors, as some parcels were controlled by absentee owners, and tracking down the ultimate decision-maker for a conversation proved impossible. Year after year, Jackson’s rows of fresh vegetables and herbs suffered the damages inflicted by these neighbors, until it simply became untenable.
JR: We ended up selling that farm and it felt bold, and scary. Like, I thought we did the thing, I thought we apprenticed and leased and bought the farm and that was the end of the journey. There was nothing else after that. So it felt like going backwards, starting back over from square one.
SM: If having “bought the farm” is a type of death, maybe having “sold the farm” is a kind of rebirth– a sad one, for sure– but one that opens up new possibilities, as it did for Jackson and his family.
Selling the farm in 2021 meant they were able to get a good price for the land, and they immediately set about looking for another farm to settle down on. The problem was, all the other properties they might have moved to had also become significantly more expensive. Especially for what they were looking for– five to ten acres of land that would be good enough for growing vegetables, but also with a home where the family could live. Jackson wasn’t looking for a palatial estate, thousands of acres, or a swimming pool. Just a small farm, that not so long ago, would have been affordable for a farmer. And yet today–
JR: A lot of realtors told us that’s rare and you’re going to pay a lot of money for it because that’s like a luxury property now to have a home with that much land around it and it not either go with a larger parcel, like a larger land purchase or not be subdivided into a subdivision.
SM: Though he was able to sell the first farm for more than they bought for, Jackson’s family hadn’t lived there long enough to build up extensive equity. They were in a healthy financial position after the sale, but still not rich enough to compete with, say, a stock broker looking for a country estate or a developer looking to build a planned community in the same corner of Kentucky where he intended to farm.
[MUSICAL INTERLUDE]
Jackson’s difficulty in finding a farm to fit his needs is not unique in agriculture. Partly this is due to the nature of the farmland market itself. On average, only about 1-2% of farmland turns over every year. Or put another way– in America, a farm generally only sells on the open market once every three to four generations.
PART 2: The History of Competing with Farmers for Land
SM: But beyond the fact that farmland is so rarely for sale, and that competition for land in general from uses like urban development is stiff, we often hear about another culprit, who’s guilty of buying prime agricultural acres and jacking up prices in farmland markets. These are the institutional farmland investors.
Whether we’re talking about hedge funds and companies, individuals like Bill Gates and institutions like the Mormon church, or even foreign entities and nations, it seems like the epidemic of non-farmers, especially corporations, buying and holding, or in other words, speculating, in farmland rose from almost nothing to crisis levels in just the last decade or two.
Frankly, that is kind of true– but also, it’s more complicated than that.
Madeleine Fairbairn: There had been of course farmland investment forever.
SM: That’s Madeleine Fairbairn, an associate professor at the University of California, Santa Cruz. She literally wrote the book on farmland investing- it’s called Fields of Gold: Financing the Global Land Rush.
MF: But the 2008 moment seemed to be a moment in which the farmland investment industry really crystallized as a thing. You start to see a lot of new entities being created, a lot of new asset management companies that specialized in farmland investment as well as a lot of existing asset management companies making farmland funds just really fast.
SM: Twenty years ago, when Madeleine first started to learn more about why these changes were happening, she discovered that it was no accident that 2008 was the moment that farmland got on the radar of so many in the investing class.
MF: In a way it’s around 2008, this kind of financialization of land started in large part because of market uncertainty, because people were freaking out about the global financial crisis and looking for real assets where they could park their wealth and feel confident that it was safe.
SM: This confidence in farmland didn’t come from nowhere. It’s something of a “truth universally acknowledged” by some of the very biggest and oldest financial institutions in the country, that farmland is an excellent growth investment, as long as you have time to wait. This is in part because of some key features of farmland– for example, the supply is fixed. As Mark Twain famously quipped, “God isn’t making any more of it,” and in fact, between environmental and industrial impacts, the total quantity of possible farmland is shrinking slightly– as we explored in Episode One. This limited and/or shrinking supply means that what’s left gets more and more valuable all the time.
Another feature of farmland– it can be rented out, like rooms in an apartment building, but unlike an apartment building, farmland does not depreciate. There are no lightbulbs to replace, carpets to upgrade, or units to renovate, and there never will be. Farmland, then, carries on accumulating rents while very rarely requiring any additional investments from the landlord.
Investors realized long before 2008 that farmland is both an investment that appreciates purely by nature of its rareness, like gold, and one that yields cost-free rental income on top of that appreciation. These investors realized that farmland could outdo even the old folktale– this asset was a goose laying golden eggs, but the goose itself was also made of gold.
[MUSICAL INTERLUDE]
It wasn’t Goldman Sachs or the Bill Gates of the world who first discovered this insight. To understand who did, and how, we’ll have to rewind a bit, to a time before companies bought farmland at all. In this era, the only companies involved in farmland markets didn’t own the dirt, they earned interest by lending money to regular people who wanted to buy farmland. In other words, they invested in farmland by giving loans to farmers.
MF: Life insurance companies had been doing tons of farm mortgage lending for ages. And it made sense because they have these really long-term liabilities that are quite predictable out into the future, and farm mortgages are similar.
SM: So the business of life insurance works like this: An insurance customer gives a company a little bit of money over a long period of time, so that if they die, their family can receive some substantial payout. The idea for the buyer of the life insurance is that if they, you know, figuratively “buy the farm”– their family will get much more money out than they ever paid in.
This business model only works because thousands or millions of people are paying into the insurance scheme all at once, and many fewer than that are making a claim at any given time. But it also works because insurance companies are taking the millions they receive and investing it in assets and ideas that will help them grow the pot overall. That means when policies need to pay out, an insurance company has both premium income and investment income to ensure they remain solvent.
Nearly 100 years before 2008, insurance companies had already realized that farm mortgages were a good asset to invest their premiums in, because farm mortgages both led to regular income in the form of mortgage payments, and if the farmer couldn’t pay back their loan, the whole deal was backed by a hard asset– the farmland– which the insurance company could foreclose on and then sell to recover the rest of their money. Compared to investing in companies or stocks, which could go belly-up and leave investors with nothing, farmland loans seemed almost risk-free.
For years, insurance companies were some of the only institutional investors engaged in this kind of lending. After all, a company would have to have a lot of assets, and a very long time horizon on which to grow them, to make investing in farmland in the 1930s, 40s, and 50s pencil out as a business.
But then the 1970s hit, and everything changed. In the year 1970, an acre of Midwestern farmland might’ve sold for about $200. By 1980, just 10 years later, the same acre would have sold for over $2,000. For a farmer with a thousand acres of farmland, this was a nearly unfathomable growth in net worth, and suddenly investors well beyond the life insurance space were starting to take notice. This was absolutely a “dollar signs in the eyes” era, but beyond the huge returns farmland was creating was the fact that farmland was also becoming massively more valuable during an of hyper-inflation in the rest of the economy. So while companies, stocks, and goods were becoming less valuable due to financial conditions, farmland was not only holding but growing its value. It became clear that farmland provided a hedge against inflation, and institutional investors were champing at the bit to get their hands on it.
So some big institutional investors started to put out proposals about how they planned to enter the farmland market.
MF: The big one was 1977 when the Merrill Lynch Hubbard and this Chicago bank proposed to create this entity called Agland Trust that was specifically for investing pension capital into farmland. And it was just panned, like there were congressional hearings called all kinds of Congress people across the aisle, like Chuck Grassley’s there, are just horrified.
SM: In the late 1970s, politicians and the general public were shocked and incensed by the idea that companies, rather than farmers, would attempt to buy farmland. Lending farmers money and collecting interest was one thing, but actually owning the land themselves, and thus turning the independent American farmer into tenants and workers, forced to share his harvest with Wall Street fat cats? That was a step too far. The public backlash back then to this proposal would have been familiar to many of us today. The public said clearly, “farmland is for farmers, not companies and investors.” And so for many would-be institutional investors of the era, their proposals bought the farm.
By the mid-1980s though, these banks and funds were counting their blessings, because the 1980s farm crisis that came on the heels of the 1970s boom hit farmland prices particularly hard. Land values collapsed, and tens of thousands of farmers went bankrupt.
In a cruel twist of fate for many farmers that became a lucrative one for their lenders, the economic carnage of the 1980s farm crisis left the insurance companies, who held many of these farm mortgages, as the owners of quite a bit of farmland. Had the insurance companies sold all their new farmland in the ‘80s, they’d have taken a bath on their investment, but they knew– from decades of experience– that if they could just hold it for a few years, the value would return. So these companies decided to keep the land in the meantime and rent it out. They were carrying out the exact plan the public rejected in the 1970s, but this time, there were no splashy proposed announcements or congressional hearings. It all happened very quietly, behind closed doors.
The companies that pioneered this in-house farmland management in the 1980s became the grandfathers of the farmland investing space, so that by the time 2008 rolled around, they were well-established, well-respected, and ready to do what couldn’t be done 40 years before.
As the Great Recession struck, these managers presented farmland as a palatable and convenient asset class for anyone looking for a long-term, reliable investment, in hard assets, that hedge against inflation.
They could show that during 2008, farmland values on average rose 16%, while the S&P 500 lost 37% of its value. Plus, rental income makes farmland a short-term win, asset appreciation makes it a long-term win. And the only difficulty was owning and managing it, but farmland managers could now do that for you.
“Farmland,” they promised, was, “the ultimate blue chip stock,” and they could help you buy it as seamlessly as you buy shares of Boeing or GE. New investment vehicles were quickly emerging to help– from public farmland REITs to real estate investment funds, crowdfunding vehicles and more. And then came the tech solutions of the 2010s, and all of that has led to right now, where I can get on an app and invest $10,000 in a farm in Missouri– without ever setting foot in the state or talking to a farmer. Or, you know, getting up from my desk.
[MUSICAL INTERLUDE]
It’s worth noting that, especially amongst very large investors, they generally want only a small part of their overall portfolio to be invested in farmland, because farmland still grows relatively more slowly, if more consistently, than say, Tesla stock or Bitcoin, and because the cost to acquire farmland, to go out and identify properties, and actually do real estate deals, is higher than the cost of acquiring stock or other financial assets.
But as Madeleine points out, when a fund has a trillion dollars under management, 1% invested in farmland means hundreds of thousands, if not millions, of acres owned. Much of the eventual value of that farmland rent and appreciation goes into the bank accounts of extremely wealthy investors and hedge fund managers, but some of it might go to you, too. If you invest in a 401K, a life insurance policy, or benefit from a pension through your employer, there’s a good chance that you, too, are accumulating some of the value of farmland.
Again, it’s not that people had just discovered these benefits of farmland investing in 2008. But what changed between the 1970s and ‘80s and 2008 was that in the later era, the American public didn’t stand up in protest to insist that “farmland is for farmers.”
There’s surely many reasons for this lack of resistance– for one, the public was a little too occupied with a home mortgage crisis at the time to be focused specifically on farmland ownership issues.
There was also the fact that companies had now owned farmland since the 1980s, and for many it surely felt like it was too late to turn the bus around. Madeleine also suggests that in the time between the 1980s and 2008, the American public just got a lot more comfortable with financiers owning everything– from beloved brands to newspapers to single family homes. So why would farmland had been any different.
But then again, Madeleine adds, though Americans might have gotten more desensitized to corporate ownership of farmland, they didn’t actually change their feelings about it. Even today, many still believe that farmers, not corporations, should own farmland. Madeleine thinks one of the big changes that occurred is not among the public but politicians, who have radically changed their strategy for addressing these feelings.
MF: The one thing that it seems that quite a lot of politicians are willing to propose is restricting foreign land ownership. These laws are politically palatable across the spectrum, in a way that allows politicians to respond to public anxiety about land changing hands in this way, land concentration, in a way that is not possible when it comes to dealing with corporate land.
SM: To Madeleine’s mind, the political obsession with foreign farmland ownership that we hear about regularly today is a kind of proxy war. Foreign nationals are the one group of non-farmer farmland owners that politicians can safely attack without alienating absentee landowners in urban centers or potential political donors within corporations.
But the fact reminds that the amount of foreign landownership in the U.S. is miniscule. Only about 2% of all land in the U.S. is owned by foreigners, and less than half of that is farmland. Plus, despite alarming and xenophobic rhetoric about Chinese, Russian, or Iranian land purchases, the vast majority of foreign-owned U.S. land is owned by Canadians and Western Europeans, especially Germans, Dutch, and English people– who all hail from countries in which Americans own a lot of land, and thus the foreign ownership is largely mutual.
And yet, 30 states have passed over fifty pieces of legislation aimed at banning or limiting the rights of foreign farmland owners, in the last five years alone. The outlines of these state-level rules vary a lot, but most are framed with alarmist arguments about national security, the safety of the U.S. food supply, and even the integrity of our national borders.
I’ve asked many of the experts I’ve talked to for this podcast about the foreign farmland ownership question, but the best answer I’ve gotten was the first, from Bruce Sherrick,
the farmland researcher who you last heard from in our very first episode. I’ll warn you, this is a bit of a long quote for us. But I really appreciate the way that Bruce just absolutely puts the question of foreign farmland ownership to bed.
Bruce Sherrick: So if I’m a Chinese citizen and I buy a bunch of land in Illinois and then we go to war with China, I think we can just confiscate assets of a foreign adversary rather directly. Next, where do you suppose the production from that land goes? Third, who do you suppose farms it if it’s an absentee owner?
So once you start peeling it back, it becomes a different set of questions altogether. They’re legitimate questions. They’re great questions. They’re complicated. And should we modernize our reporting and understanding system? Yeah, we should. Public ownership records are a backbone issue to many, many people. Have we kept up with the ability to do modern reporting on that? No, we haven’t. Yeah, should we revise? Sure. But let’s not take grandstanding kinds of positions that are completely antithetical to the ability of U.S. citizens to also own and operate in a global world. It’s just... it’s silly to have that hugely, scare tactic-based approach to legislating anything, I find, and it’s really counterproductive to U.S. agriculture in the long run.
[MUSICAL INTERLUDE]
SM: Bruce went on to argue that it’s not only foreign farmland ownership that is an overhyped problem, but also institutional farmland ownership. His evidence? The fact that today, about 90% of U.S. farmland is still owned by families and individuals. Of course, that doesn’t mean that all of these individuals and families are farmers themselves. The rate of absentee land ownership is on the rise, and has been for a while. But I think that Bruce would argue that that makes sense historically, given that more people leave production agriculture every year than enter it, and that old farmers still have the right to will their land to children and grandchildren even if they don’t farm themselves.
Then the question becomes– is it wrong that the grandchildren of farmers sit in their offices and apartments in New York and Miami and San Francisco, pocketing annual farmland rents and watching their net worth grow as their farmland inheritance appreciates? I think Bruce would argue that this isn’t wrong, and that it’s not wrong for other investors to take advantage of this system either.
[LONGER PAUSE]
So these are the barriers, and the realities of farmland financialization, that were standing between Jackson Rolette and a new farm. And on top of all of this, Jackson faced a new set of pressures too. A burgeoning interest in rural properties motivated by the pandemic, with more people looking for private outdoor recreation properties, and even market pressures related to environmental conservation efforts– as we discussed last episode.
With all of these chips stacked against him, and since he’d already been– figuratively at least– set back at square one, Jackson decided to rethink some of his base assumptions about what his dream farm might look like.
How Jackson decided not to buy the farm at all. That’s after the break.
[BREAK]
Intro:
This podcast is made possible by Ambrook. Ambrook builds financial management software for farms, ranches, and businesses across the American supply chain. It’s an all-in-one platform that simplifies accounting, record-keeping, and payments workflows while empowering operators with visibility into the health of their business. Here’s Jeff Anders, Head of Design at Ambrook, on how his team works to make Ambrook tools easy to use, engaging and inspiring:
Outro:
That was Jeff, a design leader at Ambrook, on how Ambrook supports customer success. Tune in to the rest of the season to hear from other members of the Ambrook team on why they chose to join and what motivates them to build the financial layer powering American industry.
Now, back to the show.
[END BREAK]
PART 3: A Different Way to Not Own the Farm
SM: With no available farms that fit his needs, Jackson started to wonder why owning the farm always seemed to be a “given” for new and beginning farmers. So he sharpened his pencil and put on his analyst hat, and took a hard look at the real value farmland offered him, and his explorations took him far and wide throughout the food system.
Jackson Rolett: You know, restaurants never own their buildings. Never. That’s a stupid thing for a restaurant to do. To own the building that they operate out of, and that’s interesting that in another section of the food industry, that’s the case. Whereas farms are always intent on owning the land first. But then you tie up a lot of your capital. Say, if you have to make a down payment on that.
SM: I’ll add some nuance here to say– it’s not that restaurants never own their own buildings. In fact, the restaurant chain McDonald’s has built its global empire on a foundation of property ownership. But Jackson is correct that it is much more common for small and independent restaurants to rent space, rather than buying it.
But as Jackson worked to integrate this perspective and disentangle it from the advice he’d always gotten to buy land as soon as you can– he realized that if he didn’t tie up all his capital in purchasing the land, he could use it instead to get the farm cash flowing, or even to profitability, faster. He also realized that so much of what he felt about owning farmland was, just that– feelings. But the more he thought about the reality of it, the more he realized that for all the good feelings he’d come to associate with farmland ownership, there were also bad ones.
JR: That trope farmers are only rich when they’re dead. I don’t want my worldly wealth to be tied up in something that’s value is only realized if it’s sold. So, I don’t know what the answer is. I’m interested in gaming out what happens if you just don’t buy the land. But you own the business and you are able to put equity into the business and then maybe even cash that equity out as it’s transitioned to another farmer.
[MUSICAL INTERLUDE]
SM: Jackson did game out what happens, and part of that work led him to where he is today, pouring his farming efforts, not into owned farmland, but into a 10-acre market garden at his church in the middle of Bowling Green, Kentucky. As a member of the congregation, he looked around at the empty acres around the church building, and proposed starting a farm. He offered that the first 10% of proceeds would go to the church, and the rest go to pay Jackson and back into building out the farm itself.
This is a job for Jackson, and it’s also a labor of community, faith, and love– as he’s been able to share not just funds and food with his flock, but also his knowledge and skills with the volunteers who help the farm run.
So far, he’s been pleasantly surprised to discover that not owning the land he works doesn’t take away from the joy of farming, and that not having a huge farm mortgage hanging over his head has made it all more fun too.
[PAUSE]
But that trope Jackson mentioned– that “farmers are only rich when they’re dead,” offers an interesting counter to the “bought the farm” idea. Selling the farm, not buying it, is the real world sign that someone has died. And that someone’s children don’t plan to continue the family tradition.
But looking past the death of it– the other surprising part of this trope is the word “rich.” I don’t think most people would think of farmers as “rich.” After all, food is cheap and tractors and farmland are expensive. But given the background we learned about the financialization of farmland, if they own their land, they still get to enjoy the benefits of farmland appreciation. Even if they can’t really access that wealth as long as they want to keep farming the land.
This very dilemma, that farmers have a bunch of money locked into farmland that they can’t access without selling off their business assets, was the insight that led Ben Gordon to found his company, Fractal Ag.
Ben Gordon: Fractal is essentially equity capital or financing for farmers. So, it is a minority investment in a piece of land that a farmer owns.
SM: Ben is an institutional farmland investor. But he’s probably not the one you’re imagining. He’s not an old Wall Street tycoon or an Ivy League investment bro. He grew up around agriculture in North Dakota before he headed off to an early career in the Army. Through the years he stayed connected to family roots on the farm, which eventually brought him back to a career in agriculture, and finally to starting Fractal.
But what does Ben mean, exactly, when he says that Fractal makes ‘a minority investment in a piece of land?’ Well the theory is actually pretty straightforward. Say a farmer owns a 500-acre field– which could easily be worth a million dollars. A farmer looking for capital can approach Fractal and offer to sell a share– say 40% of this field for $400,000. Fractal pays the cash, which the farmer can then use to shore up their business, buy new equipment, or buy more land, while the farmer maintains majority ownership over the whole parcel.
After that, Fractal gets to participate in the appreciation of the land, and they get a bit of rent. Fractal’s spin on the traditional model is that they work with farmers who’ve integrated regenerative practices, on the principle that better practices lead to better outcomes for farmers and the land, which enriches everyone’s investment both year to year and over the long term.
For laypeople– maybe this seems silly. If a farmer already owns their land, why would they want to sell part of it off, even if it is just a minority part of it? But the fact is, farmers often need cash, especially when they want to buy more farmland.
BG: If you look at the amount of generational transition, there’s just gonna be a lot of land that’s gonna come for sale and a couple things are gonna happen. One is, outsiders are just gonna own that land anyway. So it doesn’t matter what I do. There’s gonna be a lot of outside investment, whether that’s institutional investors or others. And we really want to have farmers owning it. The second is that, like, farmers will have to like, massively over leverage themselves and then eventually they’ll go under because they’re not positioned with a capital partner to go in or third, the whole like thing just blows up.
SM: The generational transition that Ben is referring to is already underway. By some estimates, as much as 40% of all U.S. farmland will go up for sale or be willed to another generation before 2040. In Ben’s experience, forward-looking farmers are already out in the market, seeking financial partnerships that will help them be able to buy this farmland when it comes up for sale. From Ben’s perspective, farmers need this help because banks usually require a significant down payment in order to finance land purchases. High quality Midwest cropland can go for more than $30,000 an acre, and land like the kind Jackson is looking for, good for specialty crops and near to a city, can go for $100,000 an acre. That means 100 acres of Iowa farmland might go for $3 million, and 10 acres good for vegetables for a million. When a farmer needs to put 50% cash up front, farmers simply can’t hang without help.
I think it’s easy to argue that Ben’s solution is a bit of a Bandaid over a bullet hole. Because the problem isn’t really that farmers need more access to money and financing, but that farmland has simply become too expensive.
But farmland did not become this expensive by accident. We made it this way. Over the course of this podcast, we’ve touched on so many things that have, directly and indirectly, driven up the price of American farmland. From the enforcement of private property protections to federal farm policy, from new farm technology to the rise of environmental conservation, in every generation, we’ve worked to make farmland more valuable, which has made it more desirable and more and more expensive.
BG: Essentially, anytime a government program, or a new technology comes in, that increases the profitability. It just goes right into the land.
SM: In other words, one of the key reasons that farmland is so expensive today is because farms have gotten more profitable over time. As farmers become more profitable, they have more cash to spend to buy land. That means that farmland values get bid up as more farmers become more profitable, and at the same time, farmland renters see their rents raised as well, because owners want to realize the benefit of that increased productivity too.
BG: Because there’s just this cycle where the landowner gets it. And this is actually one of the reasons we really want farmers to own their assets. So they don’t just become this like contractor class like we’ve seen in other parts. And not that there’s anything wrong with being a hardworking person who happens to be a contractor. I just like the incentive alignment of long-term management with owning the asset and realizing that value. Plus, I like having a little bit of wealth in rural communities.
[MUSICAL INTERLUDE]
SM: Throughout our conversations, I was always struck by Ben’s ability to move back and forth between his personal motivation for farmland investing, which centers on helping farmers, enriching rural communities, and reducing agriculture’s environmental footprint, and his hardnosed commitment to making money for the people who contribute capital to his investment fund.
In a lot of ways, I think, farmers are also being asked to walk this line– because in today’s farmland market, it’s not enough for farmland to be home, legacy, and livelihood. If a farmer is going to get a loan from a financier, they also have to prove that farmland will be a profitable investment.
For a farmer, though, farmland profitability is vulnerable to interest rates, federal payments, commodity prices, and trade conditions. And farmers don’t usually have the flexibility investors do, when markets turn against them.
BG: Whenever we have a down cycle in agriculture, they have to ride that out. They have to see their working capital and their balance sheet decline. I or any other investor, I get to go raise money and say, this is a great vintage opportunity. Land has come down, there’s a great investment case. So the investor inherently has this massive advantage over a farmer.
SM: The point Ben is making here goes back to what Madeleine taught us– that to institutional investors, farmland is a golden goose that lays golden eggs. When the markets are down and times are tough in agriculture, the geese are on sale, and for folks with money and income from outside agriculture, that’s a tremendous opportunity. But for farmers, with all their wealth and income tied up in farming, it doesn’t matter how cheap the golden farmland is– they don’t have the money to buy it.
Since the 1980s, this financialization of farmland has also forced farms to evolve, from small scale family operations towards being more sophisticated and diversified businesses, if for no other reason than to compete with gigantic corporations that are encroaching on the farmland they need. And from Ben’s perspective, that transition for farmers is far from over.
BG: If 2010s was the professionalization of like I used to be in a lifestyle, now I run a business. I think the 2020s and 2030s will be, I don’t just run a business, I am running a corporation, albeit a small regional or local corporation. But it’s gonna have to have HR, it’s gonna have to have good managerial accounting, it’s gonna have to have leadership and that’s a big leap.
SM: In a lot of ways, this feels like where the question of farmland financialization comes full circle. On the one hand, the public has never liked the idea of businesses owning farmland. After all, we want farmland to be for farmers. But farmland is not just for farmers anymore. It’s for anyone who can afford it. And that means that farmers have to become more like their competitors, more like the institutional investors, if they want to compete. When farmers don’t or can’t become more corporate, they’re left out in the cold, with too few resources to buy into the game.
This, I think, was part of Jackson’s realization. If he wanted to make farmland ownership work, it would require him to focus on scale, on efficiency, on bigger markets and customers that would require him to move away from the land ethic and community ethos that had brought him to farming in the first place. If he didn’t want to make that tradeoff, he realized, he was going to have to find a different model, one that didn’t center farmland ownership. And as he worked towards building one, he decided not to put something else first, to center his future, his kids, and questions about retirement and security. He questioned whether owning farmland was inherently good for him as a farmer to determine whether some other option might better suit his goals and circumstances.
JR: And I just keep thinking that I don’t take any of this with me, you know? What is it that I want to leave behind? And when I think about it in that way, owning farmland, unless it’s a vessel for wealth for my children, just doesn’t seem as important anymore. And that’s one of the reasons why we’ve set this current garden that I’m working in up the way that we have. If I’m starting something and I’m investing my time and my money into something that, God willing, will continually, even as I leave. generate 10 percent of its revenue for a church that I believe in because it has so positively impacted our life. Like I want that for other families and I want that for my kids when I’m dead. I want that church to be there. So to me, it’s oh, that’s investment.
[MUSICAL INTERLUDE]
SM: I think most farmers today still want to own farmland. But I think Jackson’s story speaks to a quiet trend that’s emerging across rural landscapes. The fact is that today, on top of all the other challenges farmers face, farmland itself has become a commodity, and in order to buy the thing they need to do their work, they have to go toe-to-toe with multinational companies, Wall Street funds, and some of the richest people in the world. Farmers that lack substantial financial resources lose those competitions, and the farmers that win are increasingly pressured towards massive-scale commoditized production. From Ben’s perspective, this is simply the reality of the situation, there’s no putting the farmland back in the “asset for the people” tube, which is why he sees his work at Fractal as a way of arming farmers for the fight.
BG: So I guess I am pragmatic where like I am going to operate within the world that exists and so I think like the real question is do you want to just have a hopes and dreams approach to a future? Regardless if you want better, stronger rural communities or you want a more environmentally sustainable agricultural system, or you’re actually gonna do something about it that’s realistic. And what I get really frustrated about is going to a conference, someone’s oh, we should have an agricultural system like this. And, there’s no realistic path for a farmer or anyone to participate in the next five years in what you’re saying. And you’re talking about philanthropic dollars that’ll get us to 0.000001% of the market. Thank you for what you’re doing. It matters. But it’s not gonna matter to anyone I grew up with.
SM: I think what Ben is getting at here, and what Jackson, even, agrees with in his own way, is that farmers exist in a financial world that does not serve them, but within which they must survive. All the other hopes and dreams we have for farmland or agriculture writ large are admirable and important, but if farmers’ leases aren’t being renewed and they can’t find a new place to set up shop, if chemical drift or a bad pest outbreak or a catastrophic storm has made it so they can’t pay their mortgage, then all of these admirable and important goals go right out the window.
In short, if farmers can’t afford to rent or own farmland, they can’t afford to farm. And no matter how talented or admired they are, if farmers can’t afford to farm, they won’t. End of story.
[MUSICAL INTERLUDE]
CONCLUSION
SM: The financialization of farmland may be reaching a fever pitch today, but it has been an ongoing project since Europeans first arrived on this continent. Everything we’ve talked about over the last eight episodes has brought us right here. From colonization and the establishment of a legal system of property rights, to the dispossession of the land’s existing occupants who were replaced with pioneers via the Homestead Act– these were all steps along the road towards Bill Gates owning a quarter of a million acres of farmland as a purely financial investment. Agrarian populism might have temporarily arrested the slide towards titans of industry owning all the land, but the Farm Bill, technology, and even some environmental actions have made the slide more slippery, and have only served to make farmland a lucrative, accessible, and secure investment. Today, questions about foreign farmland ownership cloud our vision, distracting the American public from the fact that it’s Americans that own the vast majority of farmland, and though some of it is owned by corporations, most of it is owned by farmers. Farms that look more and more like corporations all the time.
Small and mid-sized farmers are increasingly being squeezed out of this picture altogether. Some, like Jackson, still figure out how to make the dream work– they crowdfund, they take on loans, they work second and third jobs to save up enough to buy their farm. And others, also like Jackson, come to the conclusion that the dream doesn’t actually work, and that if they do manage to get a mortgage, they’ll be risking financial ruin with every hailstorm and market downturn.
Many of these farmers will, like Jackson, quit the farmland ownership dream and instead rent or lease farm ground, making themselves into the caretaker for the landowner’s golden goose of farmland appreciation, and paying for the privilege with their rent.
[MUSICAL INTERLUDE]
Jackson talked to me a lot about how difficult it was to part with the dream of farmland ownership. Hearing him talk about it made me realize, more than anything else, why “buying the farm” is a metaphor for death.
Death is the end of the road, the final place, beyond the stress and uncertainty of ordinary life.
In that way, death is a final retreat and to us Americans, a farm is a place where, to quote George Washington– “Everyone shall sit in safety under his own vine and fig tree and there shall be none to make him afraid.” And in death too, we seek this same peace and repose.
For the Founding Fathers, small farms owned by the mass of American citizens was to be the bedrock of the country they imagined. This was the basis of their revolution, a dramatic break from the European practice of a small elite holding all the land. But as farmland ownership becomes increasingly out of reach for the majority of American citizens, farmers like Jackson are starting to wrestle with what farmland means to farmers today.
Jackson Rolett: I feel like ownership can very much distort our perception of what land is and what it is for, and now that I don’t own it anymore, I feel like our economy is treated land as a store of value. And I feel like that’s dangerous. That’s not what it is. That’s not what it is intended for. I’m not saying capitalism’s wrong. I’m not saying investing in things is wrong. But treating land as a store of value is what has made it inaccessible.
SM: Throughout our discussions, Jackson was quick to challenge me about the definition of words like wealth and value, investment and security. Again, another place where he and Ben Gordon would agree is that wealth is not a measure of numbers in a bank account. Wealth is more than that, it’s about the wellbeing of communities, especially rural ones. Investment is not just where a rich person parks their money, it’s the ideas and projects we spend our time and attention on, and security too, is not just about the money socked away in a retirement fund, it’s about the resiliency of the people around us– it’s not about knowing that nothing will happen to what’s yours, it’s about knowing that the people and things you’ve poured your life into will be able to continue– even after you’ve bought the farm.
The other thing that struck me about Jackson was his openness about the role his faith has played, and continues to play, in his farming work. Jackson has been a farmer longer than he’s been a Christian. He discovered his faith alongside his work in the field. It’s so clear that the teaching of his church has shaped the way he thinks about the role of land and wealth, versus the role of people and his community.
JR: This ethos of “I need to own this farm or this land” is counterproductive to the attitudes that I feel I should have about it. There was some saint of the early church and talking about material wealth. And essentially he says, instead of building more barns to house more grain, to store your wealth, why don’t you let your barns be the bellies of the poor? And you could store infinite wealth there. And that in a phrase has exploded my conception of, yeah, we need to own the family farm.
[MUSICAL INTERLUDE]
SM: Many episodes ago, we learned that farmland is more than a financial asset, it’s an emotional asset. And speaking with Jackson, I saw this fact even more clearly. For him, buying his first farm was an ecstatic experience, and having to sell that farm felt like being forced out of the peace and safety of a final resting place back into the rat-racing world. And now, at this mid-point in his life, I think Jackson can see both things at once– the space and security and the albatross around the neck of it. But the thing he sees most clearly, I think, is that true wealth of farmland comes not from its dollar valuation, but from the fact that farmers use land to feed people.
In some ways, this brings us all the way back around to where we started this season, with questions about the relationship between farmland and food. And the reality is, that the kind of farmland that the folks at American Farmland Trust talked about in the first episode, the kind that we’re worried about running out of, is the exact kind of farmland that Jackson can’t find. In that way, it’s true, we are running out of it, but not because it’s being ripped up by hurricanes or paved over by parking lots.
We’re running out farmland because so many farmers can’t afford to buy it. And farmers can’t afford to buy it because of the cumulative impact of 300 years of farm, land, and economic policy.
Of course, the problem of land affordability is not unique to agriculture. But the reality is that if we want the condition of American farmland to change, it’s up to us– the self-governing American people– who have to change those conditions. And that’s what we’re going to focus on in our next and final episode.
Landon: Farmland is so expensive. It is inaccessible for young farmers. If you get really far out from the cities though, there’s stuff there and there’s a lot of other people who’d want to go into it and I think there’s unique ways that that could be possible as more interest comes.
SM: After 300 years of farmland in the United States, what else could farmland be, and how do we turn these other possibilities into realities? Next time, on The Only Thing That Lasts.
SIGN OFF
SM: Before we sign off, I talked through information from a number of sources and experts today, so if you want to dig into it yourself, check out the shownotes, or our website for links.
While you’re there, make sure you head over to ambrook.com SLASH offrange to stay up on the latest reporting from the Offrange team on agriculture, land, and environmental issues like the ones we talk about here on the show. After you subscribe to the podcast, don’t forget to sign up for the newsletter, and follow Offrange on socials for news about upcoming projects and stories. And we can’t wait to hear what you think! If you like what we’re doing, let us know, and don’t forget to share.
The Only Thing That Lasts is now an Offrange production. This podcast is written, produced, and mixed by Sarah Mock. Our editor is Jesse Hirsch, with support by Ali Aas. Technical support by Dan Schlosser, and general support by Mackenzie Burnett and the whole team at Ambrook.
A final note, Offrange, the media outlet that produced this podcast, is 100% editorially independent from Ambrook, the fintech company that funds it.
