Institutional investors grow influence on U.S. farmland

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Institutional investors are buying up U.S. farmland at a rapid rate, and their influence is starting to shift the types of crops grown and the way the land is managed, according to a report issued Tuesday.

There is an estimated $10 billion in institutional capital looking to acquire U.S. farmland, and over the next 20 years, as the current generation of farmers retires, an estimated 400 million acres will change hands, according to the report issued by The Oakland Institute, a Calfornia-based think tank with a focus on agriculture.

"Driven by everything from rising food prices to growing demand for biofuel, the financial sector is taking an interest in farmland as never before," said the report, which analyzed property records and other county and local property data, and other public records.

The report () cited several "case studies" and says that the institutional investment influence in some situations alters decisions about which crops to plant, land management and labor practices.

The report acknowledged that individual farmers are still the biggest buyers of U.S. farmland, and says the trend of institutional ownership of farmland is still too new to draw general conclusions about its impacts. But the report said it is "crucial" for policymakers to monitor the trend and "help ensure that farmers, and not absentee investors, are the future of our food system."

The report cited three groups as being particularly influential so far in acquisitions of U.S. farmland: The Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF), one of the largest pension funds in the world; Hancock Agricultural Investment Group (HAIG), part of the Hancock Natural Resource Group, an indirect wholly owned subsidiary of Manulife Financial Corp ; and UBS Agrivest, also known as UBS Global Real Estate-Farmland and a part of the Swiss-based UBS financial services company.

HAIG manages $2.1 billion of agricultural real estate and oversees roughly 290,000 U.S. farmland acres, according to its officials. UBS Agrivest has 113 farms totaling 183,000 acres in 15 states under management. The farms grow over 25 different crops, according to UBS. And TIAA-CREF said that it has roughly 125,000 acres of U.S. farmland.

James McCandless, head of UBS Global Real Estate, said that its properties are leased to local farm operators, mostly family farmers. Institutional investors are driven by a desire to diversify portfolios and achieve the steady income stream benefits associated with farmland, he said.

Prices for U.S. farmland have been rising rapidly in recent years, driven partly by increased demand for food and livestock feed for an expanding global population and by the burgeoning biofuels industry. Prices have started to stabilize but are still sharply higher than they were a year ago, particularly for fertile ground in the Midwest where corn and soybeans are grown.

A report issued on Thursday by the Federal Reserve Bank of Chicago said that in the fourth quarter of 2013 farmland prices in parts of the Midwest rose 3 percent from the third quarter.


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