One of the largest farmland sales in state history is fueling new speculation over a proposal in Gov. Scott Walker's budget to make it legal for foreign entities to buy large tracts of land in Wisconsin. Current state law limits foreign ownership, with some exceptions, to 640 acres but Walker wants to waive those rules and end the acreage cap.
Last November, UBS AgriVest, a unit of the Swiss banking giant UBS. paid $67.5 million or nearly $7,000 per acre for about 9,800 acres in southwest Wisconsin.
The sale of the Grant County land by investor and philanthropist Ray Eckstein of Cassville was not widely reported and didn’t get much exposure until a story last month in the New York Times noting the bull market for farmland.
It's unclear if the deal violated Wisconsin's current law on foreign ownership although state officials say it probably met Chapter 710 of the statutes. One reason is that the UBS AgriVest Fund is managed out of Hartford, Conn. Current state law also provides an exemption for purchasers from nations that are part of global free trade agreements, says Brian Larson of the state Legislative Council.
Either way, farmland is apparently the new gold for some long-term investors. The idea is to purchase land and then rent it back to farmers through professional managers, with the owners pocketing the rental income.
A 7-year-old private real estate investment trust (REIT), the AgriVest fund has been buying huge chunks of farmland in the Mississippi Delta, the Rocky Mountain states, Georgia and now Wisconsin. The fund’s 27 investors are mostly pension funds ranging from the Orange County Employees Retirement System in California to the Anchorage Police & Fire Retirement System..
Given the interest among big pension plans in investing in farmland, the Farmland Investor Center is now speculating that money manager TIAA-CREF is behind Walker's shadowy land ownership proposal.
So far, no group has come forward to fully lay claim to the Walker proposal — although the Wisconsin Realtors Association takes some of the credit. Can you imagine the commission on a $70 million sale?
But while investors in California or Alaska or Switzerland might enjoy owning a chunk of Wisconsin farmland, the development isn’t so good for state farmers, warns Kara Slaughter of the Wisconsin Farmers Union. The problem is that land speculation tends to drive prices higher, removes local control, and makes it harder for small operators to turn a profit.
Slaughter notes in the April edition of the Farmers Union newsletter that California’s dairy industry is reeling in part because of soaring land prices that have made it prohibitively expensive for the mega-dairies there to buy grain for thousands of animals confined in giant feed lots. As a result, more than 100 of California’s 1,600 dairies went out of business in 2012, she writes.
Add in the fact that nearly 50 percent of California farm acreage is rented vs. just 30 percent in Wisconsin, and Slaughter says there are inherent risks in a system where producers don’t own their own land.
“The strength of Wisconsin’s dairy farms lies in their diversification and resilience — a brilliant system where manure feeds the plants, the plants feed the cows and the cows feed the farmer,” she writes.
Slaughter says farming has remained a backbone of the Wisconsin economy through good times and bad because of the way it has been structured. She says the trend toward outside ownership of the land is decidedly problematic.
“Sometimes we don’t know a good thing until it’s gone,” she says. “The current state of affairs in California suggests strongly that the concept of separating the acres from the cows is a bandwagon we do not want to hop on.”