Investing in the ‘thin green line’ that secures America’s food supply

Retired U.S. Army General and NATO Supreme Allied Commander Wesley Clark penned a 2011 article about agriculture’s importance to our national security. 

“We must hold the thin green line,” Clark wrote in the Kansas City Star. “If we cannot feed, fuel, and clothe ourselves, then we cannot defend ourselves.”

His warning is especially poignant today amid global food supply disruptions and price spikes caused by war, inflation, and the pandemic. Not to mention the fact that the planet’s population surpassed 8 billion people on Nov. 15, according to the United Nations.

Unfortunately, the number of U.S. farms and farmland needed to provide affordable food for all these hungry mouths are declining.

Fewer than 220,000 farms — most of which are family operations — now produce 80 percent of the country’s agricultural output, according to the U.S. Department of Agriculture. And America now has just 1.2 acres of farmable land per person, according to the World Bank, which is down from 1.5 acres in 2000 — because farmland is being lost to development, transportation networks, and other uses.

So, what can be done about it? Americans can’t be expected to quit their desk jobs to become farmers, and once farmland is converted to another use, it almost never returns. 

But we can take advantage of agriculture’s unique supply-and-demand characteristics, where food demand is rising as farmland is declining, to attract outside money into the industry and help drive farm productivity.

As someone who has spent much of his life in agriculture, I think giving everyday Americans an opportunity to invest in farmland and, by extension, invest in agriculture’s success is a big step in the right direction.

When Americans from coast to coast have a true financial stake in agriculture’s success, they are more likely to educate themselves about the business and advocate on its behalf. Misconceptions about modern-day agriculture dwindle, the rural-urban divide shrinks, and consensus builds to arm farmers with tools and government policies needed to drive productivity and mitigate risk. 

That’s why I’ve been surprised to see some people advocating against farmland investors, which comprise a small sliver of the overall market.

Such antagonists aren’t simply targeting investors from enemy states with nefarious agendas. 

They’re talking about making it harder for honest U.S. investors to own land that is rented back to farmers — a strategy that could drive a wedge between Main Street and Wall Street and require farmers to shoulder more debt from lenders to buy land and scale operations.

At a time when interest rates are on the rise, shouldn’t we be looking for ways to get more equity capital infused into rural America instead of leaving farmers beholden to debt capital? I can’t imagine any industry, including agriculture, that benefits from less outside investment.

Such anti-investor — and frankly anti-farmer — suggestions are not unprecedented and play into populist tendencies. A handful of states banned corporate ownership of farmland decades ago in the name of helping farmers, effectively locking investment vehicles and retirement funds out of those markets. 

I don’t believe those laws have helped farmers, made land cheaper for young growers, or benefitted retiring farmers or family members looking to sell. And I fear that emulating these laws in other states or on a national stage would be a mistake.

That’s because these laws have historically hurt market transparency and competition and increased price volatility where enacted — all while doing little to curb farms being sold off for housing developments, shopping centers, and even billionaires looking to boost their personal landholdings. 

It’s also created an environment where farmers are often stuck with less sophisticated landlords who lack the skill or funds needed to make meaningful improvements in the land.

Investors are incentivized to increase asset values by improving farm productivity, which is why our company often invests in irrigation, drainage systems, and on-farm grain storage facilities to help farmers maximize profitability. And we often lease farms back to the same farmer who sold the land, helping them stay on the family farm and unlock equity. 

Farmland investment vehicles also typically set the value floor, not the ceiling, in farmland transactions. That’s because we have shareholders to answer to, so we’re careful not to overpay. Farmers, on the other hand, have farming operations to help cashflow higher bids.

Placing off-limits signs on America’s farmland and shouldering farmers with more debt will not feed a growing population. If anything, agriculture needs more everyday Americans investing in its future and becoming financially interested in keeping the thin green line from getting thinner.

Paul Pittman is chairman and CEO of Farmland Partners Inc. (NYSE: FPI), the nation’s biggest farmland real estate investment trust (REIT) by acreage. The company owns and/or manages approximately 195,000 acres in 19 states.