Foreign-owned Ag Land in the US

Lately, there has been a lot of talk and concern over foreign-owned land in the US.  A lot of “blame” has been placed on Chinese interests in the US – the incident of the balloon drifting over the US almost a year ago brought that conversation to the front (See one of many articles here).

As a result, some states are considering a ban on foreign investment, with Arkansas being the first to enact a statute to ban all foreign investment in October, 2023.  Other states ban specific countries from ownership in specific areas (for example, around military bases).

Chinese investors own WH Group, which acquired Smithfield Foods in 2013.  China National Chemical Corp (ChemChina) acquired Syngenta in 2017.

Foreign investment in the US is not a new concept.  (If you think about it, the US was founded on foreign investment more than 200 years ago).  However, the news of foreign investment over the past several years has made lawmakers and landowners nervous.

Here are a few statistics: (Source:  AgWeb “Which Foreign County Owns the Most Farmland in the US?  Hint:  It’s Not China”)

  • 43.4 M acres of forest or farmland in the US is foreign-owned.
    • Approximately 30 M acres are foreign-owned, with the remainder under a 10-year or longer lease
    • 2/3 (66%) of the 30 M acres are owner-operated
  • 43.4M acres translates to 3.4% of all US forest and farmland
  • This information only addresses ag and forest real estate and does not include commercial investment in real estate, investment in urban areas, or general ownership of Fortune 500 corporation stock
  • Top 5 Countries invested in Ag land (percent of the 43.4 M foreign-owned acres):
    • Canada – 32% or 14.2 M acres
    • Netherlands – 12%
    • Italy – 6%
    • UK – 6%
    • Germany – 5%
  • China owns less than 1% of the total number of foreign-invested acres, or 349,442 acres
  • For contrast, consider:
    • Ted Turner owns about 2 M acres of farmland
    • Jeff Bezos owns about 420,000 acres
    • Bill Gates owns about 269,000 acres

Click Image to go to source

The conversation about foreign investment tends to be alarmist – the action taken by Arkansas was specifically directed at 160 acres owned by Syngenta in Arkansas out of approximately 1,500 acres owned nationwide.

Where is this trend moving?  The concern is primarily over China, North Korea, Iran, and Russia, but China barely registers as a foreign investor in US Ag land, and NK, Iran, and Russia don’t register at all.  One source said Russia owns 73 acres of US farmland (source credibility is questioned).

Check out the graphs below.

Click on image to go to source article

Click on image to go to source article

Is foreign investment in agricultural production a cause for concern?   As mentioned earlier, this is not a new thing, and there are plenty of US Companies and US Citizens who invest in international business and real estate, so the concept goes both ways. US investment abroad accounts for more than $6.5 trillion dollars.

Click on image to go to source

Foreign investment in the US can bring economic development and jobs to communities, and most foreign companies that invest locally become good community partners.  In the case of Smithfield and Indiana Packers, the purpose of the foreign investment is to provide quality and reliably-sourced meat products for China (Smithfield) and Japan (Indiana Packers), in addition to US markets.

In Carroll County, Indiana, Packers Corporation is the county’s largest employer (2,000+ employees in the packing plant) and provides income for hundreds of farmers who grow corn for Oracle Pork, the IPC subsidiary that owns the genetics and the pigs grown for the packing plant.  Dozens of farmers grow pigs for OP, which are delivered to IPC for processing.  Indiana Kitchen is a top-tier pork brand that provides bacon to US grocery stores (and the Royal Caribbean Cruise Line – see 2:36 of the video), as well as fresh pork and cured hams.  Indiana Packers has been a successful and community-minded organization in Carroll County since 1989.  Local nonprofit organizations and food pantries have benefited from generous contributions of both meat and funds to support community projects.  Japanese-owned Mitsubishi Corporation owns Indiana Packers.  If Indiana Packers were to suddenly be banned from the US or the State of Indiana, the economic loss to Carroll County and Indiana would be devastating.

The facts (see tables above) show that foreign investment by “unfriendly” or “suspicious” nations is negligible.  Banning ALL foreign investment in agriculture to manage a few countries that barely register on the radar is extremely short-sighted and akin to taking a “sledgehammer to a nail.” (thanks to Chris Hesse for the apt description).  Such protectionist moves risk the removal of foreign investment by companies (and countries) that are friendly and terrific community and economic partners and who bring welcome services and products to the US.

Do You Need a Trust to Protect Your Farm?

Like any good lawyer, the first answer is always, “It Depends.”  However, before jumping into a Trust there are a lot of other options to consider.

First – let’s set some parameters for this discussion:  if the value of all of your assets is more than the estate tax exemption (for 2023, that is $12.92M or $25.84M for a married couple), then effective planning can be much more complicated and beyond the scope of this article.  For purposes of this article, we are assuming that your combined net worth is less than the exemption amount, so we can make use of several techniques that are relatively easy to implement.

Let’s (briefly) talk about the two primary kinds of trusts – Revocable and Irrevocable.

Like the name suggests, a Revocable Trust can be revoked or changed at the whim of the Settlor (the person who creates the trust – in this case, YOU).  It is not “irrevocable” until your death.  This is useful for easy transition to the next generation and avoids the somewhat time-consuming and cumbersome journey through Probate.  It is fairly easy to set up, with the most complicated feature being remembering to put all (or almost all) of your assets into the Revocable Trust as you continue on your life journey.

If a Revocable Trust is a good idea for your planning, I don’t recommend putting your farm assets in the TRUST.  Instead, I recommend creating a Limited Liability Company or other entity to hold the farm assets, and then your Revocable Trust can own the entity.  The entity is free to continue farming as before, the “public-facing” entity is not a “trust” (more business-like appearance), and it is much easier to divide ownership shares between heirs than acres (or tractors).

A Revocable Trust does not save estate taxes, which is why you should seek other planning if you have a net worth in the Estate Tax Danger Zone (ETDZ).

An Irrevocable Trust cannot be revoked and has only limited ability to change.  It is a completed “gift” of your assets to the Trust.  Those assets must be appraised and a gift tax return filed, which will erode (reduce) your available estate tax exemption.  Because I try to build as much flexibility as possible into my clients’ estate plans, this is not (typically) a good tool for folks not in the ETDZ.

There are other planning tools that might be easier to transfer assets to the next generation if your assets are not an active farm business.  For example, if you cash rent all of your land (or farm on the shares), or for other assets like investment accounts, a  “Transfer on Death” (TOD) ownership will retain 100% of ownership in your hands and control, but at your death, the asset automatically transfers to the named beneficiary.  This technique works for any asset that does not already have a beneficiary designation (such as an IRA).  TOD ownership can be used for real estate, investment accounts, automobiles, and anything with a “title” or “named” ownership.  You can even use it for “non-titled” personal property, like artwork, furniture, and  household goods, if you set it up correctly.

When you talk to your attorney, be sure that your advisor reviews the available options with you.  If you go to an attorney and say “I want a Trust,” the attorney should spend some time reviewing other available options with you.  If not, then please talk to another attorney.  I have seen too many clients who have trusts that are not useful to the client’s estate planning goals – and some with harmful (with a tax burden or impact on family harmony) and unintended consequences.  Be sure you understand the options and are comfortable that a Trust is right for you.

 

Just Say No – To Plastic

Single-use plastic is one of the biggest contributors to landfills and trash pollution.  [National Geographic:  Great  Pacific Garbage Patch].  We’ve all heard of “microplastics” by now [NOAA:  What are Microplastics?], and plastics can be found in measurable amounts in US waterways and water-sourced foods [USGS: Microplastics in Our Nation’s Waterways].

I could go on with the citations, but you get the idea, and this is probably not news to you.

What can you do about it?  Start making a habit of avoiding plastic.

Avoid:  Plastic bags for purchases, plastic containers for take out (or “doggy bags”), overly-packaged items (always encased in plastic).

Biggest thing to avoid?  Plastic drink containers, especially water bottles. [Earth 911:  Who are the Biggest Plastic Polluters 2021].

 

While corporations (see above image) are by far the largest polluters, individuals can help to move the needle toward conservation and reduction of pollution by taking consistent action to avoid contributing to the problem, and encouraging others to join in.

TrashBlitz Austin used volunteers to collect and count trash to come up with a way to reduce the use of plastic in the city of Austin.   70% of the trash picked up consisted of single-use plastic items.  One of the outcomes of this effort was the Austin Reuse Coalition with a focus on helping restaurants reduce the use of plastic.

Please do your part to reduce use of plastic, and encourage others to do so, also.  If everyone eliminated plastic bottles and plastic bags from their lives, there would be an immediate and visible reduction in pollution.  It has to start somewhere – let it start with us.

#breakfreefromplastic