More than 40% of America’s farmland is rented. Who it’s rented from might surprise you though, as it’s not all farmers. A majority of the land is owned by non-farming landlords. In some cases, it means institutions, while in others, it’s just individual investors that see the possibilities in rural real estate. Farms used to be owned strictly by farmers, but a lot has changed since the 1940s, and more so in recent years with the
appreciation of the land and the comeback of the real estate market.
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How it Breaks Down
Today there are more than 3 million farm owners throughout the United States. How the ownership breaks down might surprise you though.
Your smaller family farms are the most likely candidates for owner operation. Almost half of the farmland in the United States is
small family farms. Of these small family farms, just over 45% of them are owned and operated by the farmers. This means the people that own them also operate them. Mid-size and large family farms account for 51% of the farmland in the United States. These farms tend to be about 50/50 owner operated and rented. The remaining 4% of the farmland is owned by nonfamily.
What are Institutions Doing With the Farmland?
It seems strange to think that institutions and investors would want anything to do with farmland if they aren’t going to farm the land. What value could there be in it for them?
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Aside from the fact that they can lease the land out to farmers that cannot afford their own land, investors also have other ways of making money. Some invest in the land only to turn it over for a profit. Others buy low-value land and then upgrade them so that they can produce
high-yield crops and turn a greater profit.
Many investors see investing in farmland as a way to diversify their portfolio. A portfolio heavy in stocks and bonds is risky if the market takes a dive. If they balance it out with farmland, they can have sort of a checks and balances system, where one investment doing well can make up for another investment doing poorly.
Many of American’s farms continue to stay within specific families, even as the farmland is passed down from generation to generation. This leaves a small amount of farmland available for new farmers, making leasing the farmland a greater possibility for those starting out. In fact, access to farmland is one of the largest barriers for new farmers. New farmers will have to find ways to get creative, which means renting, land sharing, or entering lease-to-buy agreements in order to start and build their farming career.
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