Investors uncomfortable with the volatility in the stock market have increasingly turned to real estate to satisfy their need for a stable investment. Now, those investors can leverage their funds to achieve a healthy return while contributing to national security with income-producing farms.
Farmland offers a variety of possibilities with unique yields as an asset class. However, it also provides a strategic staging location for foreign intelligence operations. According to the USDA, “Foreign investors held an interest in over 43.4 million acres of U.S. agricultural land… as of December 31, 2022… [representing] 3.4 percent of all privately held agricultural land in the United States.”
Chinese nationals secure U.S. farmland for espionage purposes
Recent media reports claim that China is buying up hundreds of thousands of acres of U.S. farmland that is strategically positioned near U.S. military bases. A report that appeared in the New York Post in June 2024 cites sources who suggest Chinese landowners operating under the guise of farming “could set up reconnaissance sights, install tracking technology, use radar and infra-red scanning to view bases or attempt to fly drones over them as ways to surveil military sites.”
The New York Post claims to have identified 19 U.S. military bases that are near farmland purchased by Chinese entities that “could be exploited by spies working for the communist nation.” The issue attracted the attention of the U.S. Senate in 2023, prompting the passage of a ban on purchases of U.S. farmland by China, Russia, North Korea, and Iran.
The pushback against foreign ownership of farmland mitigates competition for real estate with the potential to provide a healthy ROI. Moreover, it ensures that more acreage is placed under the control of U.S. citizens, boasting the additional benefit of preventing foreign influence.
U.S. investors gain equity and income from farmland
Investor interest in farmland has skyrocketed since 2008, with the amount purchased by investment firms increasing by 231 percent. The value of farmland has also seen a 100%+ increase, with the average cost per acre growing from $2,700 in 2010 to $5,460 in 2023.
In addition to the natural appreciation, tax benefits, and consistent market demand that come with all forms of real estate, income-producing farms also provide a passive income similar to that derived from a rental property. For instance, higher-dollar cropland is used for farming crops, which can provide income either from renting the land to farmers or from money derived from the crop sale. Pastureland, which is typically less expensive, is used to rear livestock. This can also generate income through rent or the eventual sale of the livestock it supports.
Making investments through farmland-focused REITs
Investing in farmland can be daunting for those without prior experience in the field. The initial investment can be significant due to the large acreage most farms possess. With the average farm size being nearly 450 acres, the cost of a farm can easily exceed $2 million.
One avenue investors can utilize to approach this asset class is real estate investment trusts (REITs) that target farmland. Since REITs own a collection of income-producing properties, investors can buy a share of the profits with as little as $1,000 in some cases.
The current economy has increased the value of investments that can serve as a hedge for inflation. Income-producing farmland stands out as such an investment. Its key features, including intrinsic value, income generation, and the potential for appreciation and flexibility, make it a desirable asset class resilient to inflationary pressure.
