Foreign Control of U.S. Farmland has Recently Doubled, And the USDA Doesn’t Know Who Owns What

Johnathan Hettinger September 28, 2017

Foreign investors currently control 27.3 million acres of farmland in the United States. They are required by law to fill out an FSA-153 form with the USDA, but the Midwest Center for Investigative Reporting has discovered that much of the Department's data is out of date, incomplete or inaccurate.

A law requir­ing for­eign investors to report trans­ac­tions of farm­land to the U.S. Depart­ment of Agri­cul­ture (USDA) has been on the books for almost 40 years. But as the amount of for­eign-con­trolled farm­land dou­bled in mil­lions of acres between 2004 and 2014, the USDA has lapsed in enforc­ing the law, a review of USDA doc­u­ments has found.

The Agri­cul­ture For­eign Invest­ment Dis­clo­sure Act was passed in 1978 to com­bat fears about increas­ing for­eign invest­ment in farm­land. About 27.3 mil­lion acres of agri­cul­tur­al land in the Unit­ed States are con­trolled — either owned or under a long-term lease agree­ment — by for­eign investors, accord­ing to a USDA data­base of for­eign invest­ment in farmland.

The land, rough­ly the size of Ten­nessee, is worth $42.7 billion.

But, since 2011, the USDA has only assessed 10 fines under the law, worth $115,724, accord­ing to records obtained by the Mid­west Cen­ter for Inves­tiga­tive Report­ing through the Free­dom of Infor­ma­tion Act. And no fines were assessed in 2015, 2016 or so far in 2017.

Lesa John­son, the man­ag­er of the USDA pro­gram, acknowl­edged her office does not review the fil­ings for com­plete­ness or accu­ra­cy. She said her office also does not inves­ti­gate to see if com­pa­nies with for­eign own­er­ship file these forms because of a lack of staff and resources. Even before the recent down­turn in enforce­ment, the USDA only assessed 187 penal­ties between 2004 and 2010, val­ued above $667,000. But the largest fine of $111,266 dur­ing that time, which made up a sixth of the total, was the result of a com­pa­ny self-report­ing its lack of com­pli­ance with the law.

We real­ly can’t go after any­one,” John­son said. We don’t know it’s late until they call and put in a form past 90 days.”

Under the act, every for­eign per­son or enti­ty that acquires at least 10 per­cent inter­est in agri­cul­tur­al land must file what is known as an FSA-153 form. Agri­cul­tur­al land is defined as a par­cel of land at least 10 acres in size or that could pro­duce $1,000 in rev­enue from agri­cul­tur­al activ­i­ties. The form requires dis­clo­sure about a broad num­ber of things, includ­ing how the project is financed, who the own­er is and where the own­er is from. Penal­ties for not fil­ing with­in 90 days can be as severe as a fine of up to 25 per­cent of the fair mar­ket val­ue of the land.

Sen­a­tors Chuck Grass­ley (R‑Iowa) and Deb­bie Stabenow (D‑Michigan) have spon­sored the Food Secu­ri­ty is Nation­al Secu­ri­ty Act of 2017 that would strength­en the mon­i­tor­ing of for­eign invest­ment. The act would give food and agri­cul­ture offi­cials a per­ma­nent role on the fed­er­al com­mit­tee in charge of review­ing for­eign invest­ment in the Unit­ed States.

No progress has been made on the new act, but Grass­ley told the Mid­west Cen­ter for Inves­tiga­tive Report­ing through spokes­woman Jill Ger­ber that the USDA should enforce the Agri­cul­ture For­eign Invest­ment Dis­clo­sure Act.”

He said the USDA should make sure the own­er­ship infor­ma­tion is clear and up to date.

Trans­paren­cy adds val­ue wher­ev­er it occurs, and ana­lyz­ing trends in land own­er­ship is help­ful to under­stand­ing the cur­rent state of Amer­i­can agri­cul­ture. And on prin­ci­ple, agen­cies should enforce the laws on the books or ask for leg­isla­tive updates if the laws are obso­lete,” Grass­ley said. Good gov­ern­ment depends on good laws and the faith­ful exe­cu­tion of them.”

A sep­a­rate USDA data­base on for­eign invest­ment in farm­land reviewed by the Mid­west Cen­ter showed that 27.3 mil­lion acres of agri­cul­tur­al land in the Unit­ed States are con­trolled — either owned or under a long-term lease agree­ment — by for­eign investors. The land, rough­ly the size of Ten­nessee, is worth $42.7 bil­lion. But many of those records are incom­plete and inac­cu­rate. For exam­ple, about one mil­lion acres of land have no infor­ma­tion about which coun­try the own­er is from. About 300,000 acres also do not list who the own­er is. And typos with­in the data can be mis­lead­ing about the true value.

In addi­tion, spot checks by the Mid­west Cen­ter of the data show that many parcels of land are no longer con­trolled by the own­er list­ed in the data­base. Fur­ther­more, it is dif­fi­cult to deter­mine who owns many lim­it­ed lia­bil­i­ty com­pa­nies or how many com­pa­nies are owned by for­eign investors in whole or in part.

A self-report­ed mistake

Because the USDA has lit­tle capa­bil­i­ty to review fil­ings of for­eign investors, the result is that the USDA relies on com­pa­nies to report errors. 

For exam­ple, in 2010, a team of attor­neys at Atlanta law firm Mor­ris, Man­ning & Mar­tin real­ized they had failed to file a $98.9 mil­lion pur­chase of 55,000 acres of Alaba­ma, Mis­sis­sip­pi and Ten­nessee tim­ber­land. The firms’ cor­po­rate and real­ty teams had mis­com­mu­ni­cat­ed, and no one had filed the FSA-153 form with the fed­er­al gov­ern­ment, accord­ing to Rebec­ca Van­div­er, then an attor­ney at the firm.

Records show the form was required because their client, RMK Select Tim­ber­land Invest­ment Fund I, LLC, a tim­ber invest­ment man­age­ment orga­ni­za­tion, had own­er­ship inter­est from Den­mark. Van­div­er said she anony­mous­ly called the fed­er­al gov­ern­ment about the lapse, and a USDA offi­cial explained how to file and what the fine for the late fil­ing would be.

Mor­ris, Man­ning & Mar­tin decid­ed to vol­un­tar­i­ly file late, which would result in an $111,266 fine, cov­ered by mal­prac­tice insur­ance, rather than be in non­com­pli­ance. But Van­div­er said that it didn’t appear the fed­er­al gov­ern­ment would have ever known the fund was in non­com­pli­ance if the firm hadn’t self-report­ed. And records and com­ments from the USDA con­firm her perception.

The fine for RMK Select Tim­ber­land Invest­ment Fund I, LLC, was the largest fine since at least 2004, enforce­ment records show. Van­div­er, who also rep­re­sent­ed two oth­er funds that were fined about $95,000 at the same time, called the penal­ties dra­con­ian.”

The gov­ern­ment seemed to be treat­ing this as a sim­ple fil­ing, so the fine was dis­pro­por­tion­ate­ly high for miss­ing a fil­ing,” Van­div­er said.

Van­div­er, who rep­re­sent­ed many dif­fer­ent real estate invest­ment firms includ­ing for­eign firms, said that cor­po­rate struc­tures can often make it dif­fi­cult to find out who the own­er is.

With a lot of these LLCs, find­ing out who the investors are would not be easy, to be hon­est,” Van­div­er said.

Because of that dif­fi­cul­ty, get­ting around the fil­ing require­ment — either by neg­li­gence or inten­tion — would not be that hard, Van­div­er said.

If peo­ple aren’t doing the fil­ings, the gov­ern­ment isn’t look­ing into this like they should be,” Van­div­er said.

Wait­ing for the owners

John­son, the pro­gram man­ag­er, said that it’s like­ly some own­ers don’t file FSA 153 forms.

It’s all based on the per­son com­ing to us,” John­son said. We have no way of know­ing if there is some­one who is sup­posed to file, and they aren’t. We don’t have peo­ple out there looking.”

Penal­ties for late fil­ings are only applic­a­ble to fee inter­est own­er­ship, or out­right own­er­ship by the for­eign enti­ty. But from 2004 to 2014, about 5.1 mil­lion was leased by for­eign enti­ties, large­ly for­eign renew­able ener­gy com­pa­nies, who lease the land for wind and solar farms. This land is val­ued at $8.5 billion.

John­son said one rea­son the USDA has not enforced this law is because there is no penal­ty for late fil­ings for the com­pa­nies who lease land and who now make up such a sig­nif­i­cant por­tion of the growth in for­eign invest­ment. John­son also said the down­turn in enforce­ment is due to more peo­ple hav­ing knowl­edge of the law.

Peo­ple are fil­ing on time and in com­ple­tion,” John­son said. I think the word is get­ting out that you’re sup­posed to file with­in 90 days.”

The USDA has its coun­ty offices pub­lish the act’s require­ments a few times per year in their newslet­ters, John­son said. Over­all, the USDA has 4,500 loca­tions. They also ask coun­ty clerks and local real­tors to share the infor­ma­tion. Most FSA-153 forms are filed with coun­ty offices and then for­ward­ed to the USDA in Wash­ing­ton, though many com­pa­nies with a large num­ber of acqui­si­tions file direct­ly with Wash­ing­ton, John­son said.

John­son said issues with the data­base could be because of issues merg­ing the data, which is stored both in Kansas City and Wash­ing­ton D.C. How­ev­er, she said that much of the com­plete data could result from com­plex own­er­ship structures.

The USDA may not know who the for­eign own­er is or what coun­try they’re from because the FSA-153 form is lim­it­ed to three tiers of ownership.

I’m sure there are some that slip through the cracks,” John­son said.

Increas­ing con­cern over for­eign investors in agriculture

For­eign invest­ment in agri­cul­tur­al land has been an area of con­cern for the past few years. In 2013, Chi­nese firm Shuanghui pur­chased U.S. pork pro­duc­er Smith­field Foods for a record $4.7 bil­lion. And this year, Chem­Chi­na, China’s state-owned chem­i­cal com­pa­ny, pur­chased Swiss agribusi­ness com­pa­ny Syn­gen­ta, one of the largest seed and crop pro­tec­tion com­pa­nies in the world. Ger­man com­pa­ny Bay­er is also in the process of pur­chas­ing St. Louis-based Monsanto.

In an August pol­i­cy brief, the Orga­ni­za­tion for Com­pet­i­tive Mar­kets (OCM), a non­prof­it orga­ni­za­tion focus­ing on antitrust and trade pol­i­cy in agri­cul­ture, called for adop­tion of the leg­is­la­tion, as well as bet­ter enforce­ment of AFI­DA. We believe for­eign own­er­ship is a nation­al secu­ri­ty issue and a food secu­ri­ty issue,” said Joe Maxwell, the exec­u­tive direc­tor of OCM.

We see more and more mon­ey being dumped into this sec­tor, and it puts farm­ers and ranch­ers at an unfair com­pet­i­tive dis­ad­van­tage. It locks out farm­ers, and it locks out rur­al communities.”

Maxwell said that for­eign invest­ment in agri­cul­ture land arti­fi­cial­ly dri­ves up the val­ue of land above pro­duc­tion val­ue, dri­ving farm­ers out of the mar­ket. Maxwell, the for­mer lieu­tenant gov­er­nor of Mis­souri, said the AFI­DA data­base is help­ful but it’s hard to make good poli­cies when there are so many prob­lems with the data col­lect­ed. It’s hard to find the data,” Maxwell said. 

(The data­base) only tells you what’s behind it, and what’s behind it isn’t that complete.”

This sto­ry was orig­i­nal­ly pub­lished by the The Mid­west Cen­ter for Inves­tiga­tive Report­ing and is repost­ed on Rur­al Amer­i­ca In These Times with per­mis­sion. The Mid­west Cen­ter for Inves­tiga­tive Report­ing is a non­prof­it, online news­room offer­ing inves­tiga­tive and enter­prise cov­er­age of agribusi­ness, Big Ag and relat­ed issues through data analy­sis, visu­al­iza­tions, in-depth reports and inter­ac­tive web tools. Vis­it them online at www​.inves​ti​gatemid​west​.org.

Johnathan Het­tinger is a jour­nal­ist based in Liv­ingston, Mon­tana. Orig­i­nal­ly from Cen­tral Illi­nois and a grad­u­ate of the Uni­ver­si­ty of Illi­nois, he has worked at the Mid­west Cen­ter for Inves­tiga­tive Report­ing, the Liv­ingston Enter­prise and the (Cham­paign-Urbana) News-Gazette. Con­tact Johnathan at jhett93@​gmail.​com and fol­low him on Twit­ter @jhett93.
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