Why Bill Gates is Buying Up US Farmland Do you Know
Bill Gates owns more land thanall of the entire city of New York. Jeff Bezos's land isdouble the amount clocking in at 420,000 acres. John Malone, thelargest private landowner in America, owns 2.2 million acresall by himself — a landmass slightly smaller than the islandof Puerto Rico. America is enormous, yet 100 of the richestand largest private landowners in America own 1.86% of all theland available in the United States, the majority of theirland being forests, ranches, and farmland, Some people like myself findfarms beautiful and peaceful and nice place to live. Land is only getting morevaluable.
Why Bill Gates is Buying Up US Farmland-
In the mid 1990s, farmland was valued at less than$1,500 an acre adjusted for inflation. By 2020, that numberhad grown to $3,160 an acre. It's expensive. So if somebodyis desiring land, it is primarily people of wealth who can afford it. Institutionalcapital is growing and it's becoming a bigger piece of themarket. It's about a $3 trillion asset class when you look at thewhole U.S. However, not everyone isbenefiting from the rise in farmland prices, It's going to continue to beharder for farmers, for beginning farmers like myself,if prices continue to go up. Everything's going up. Land is critical. And it's it's thecenter of how we survive and persist as communities and aspeople and farmland in the US is something that we don't thinkabout that often. So why are the ultra wealthyinvesting in farmland? And what impact will it have on theagricultural industry? In 2020, Bill Gates made headlines forbecoming the largest private farmland owner in the U.S. Hehad accumulated more than 269,000 acres of farmland across18 states in less than a decade, shielding is purchased by buyingup land through shell companies. Why? It's a good economicinvestment. Land has always been somethingthat the ultra wealthy, people of real means have have desired.It has great intrinsic value. Beyond that, it is a limitedresource. They're not creating any more of it. And in fact,quite the opposite.
We lose farmland all the time. In theUnited States, we're losing farmland at a rate of about2,000 acres a day. It is not only more and more importantover time, but we have less and less of it. So it's an assetwith increasing value. Farmland values began rising in1988. And except for the single year declines in 2009 and 2016,values have seen a steady increase over the years. In themid 1990s. farmland was valued at less than $1500 an acre. By2020, that number had grown to $3,160 an acre. It's not correlated with thestock market and other major asset classes and so people likethat diversification and it's been a very stable performer. Ifyou go back to COVID when the stock market, you know, lost 10,20, 30, 40% at the beginning of COVID, you don't wake up and fin out that your farmlands worth 5 cents on the dollar the next da Bill Gates is not the only oneeyeing this investment. In 2011, the top 100 largest privatelandowners owned about 32.7 million acres of land across theUnited States. Today, that number has grown to over 42 .1million acres, roughly th e size of Florida and Connecticutcombined.
His farmland grows onions, carrots and evenpotatoes that are used to make McDonald's french fries. ThomasPeter five is the 17th largest private landowner in the USowning 581,000 acres. The reason I own lands in theMidwest is because these are agricultural lands, right? Andthat's where the farms are, right? I'm not farming inBoston. If someone is really interestedin acquiring a piece of land and with farmers, once you own oneparcel, you often want to own the parcels that are adjacent toit. So if you can make those purchases quietly, it might be afar more successful way to make those purchases economically. They are not one largetransaction there are several smaller pieces, and they wereusually purchased at auction. The vast majority of the landheld by the largest private landowners are forest, ranches,and farmlands located in states west of the Mississippi Riverwith few exceptions like Maine and Florida. When we think about farmland, wethink about the Midwest being, you know, the most fertile, mostvaluable farmland in the world. And I liken it to being theManhattan of farmland when you look at Iowa, Illinois, thosetypes of regions. But then when you look at California,California and the Pacific Northwest, up in Washington andOregon and the Mississippi Delta, those are some othermajor regions that you'll see a lot of that major capitalplaying and that's where the agricultural productivity is.
why Bill Gates is Buying Up -
Today, the US Department ofAgriculture estimates that 30% of all farmland is owned bylandlords who don't farm themselves. Buyers oftenpurchase land from farmers who have owned it for decades. Manyof whom are asset rich, but maybe cash poor. The way the market works is theland transitions primarily to the people who will pay the mostmoney for it. So a lot of farmland gets purchased bynon-farmers. I think many farmers would liketo see their land remain in agricultural production, wouldlike to sell it to another farmer. But the economicrealities for them are typically that they've spent their lifefarming. Their retirement, their equity is all in the land andtied up in selling land. Institutional capital is growingand it's becoming a bigger piece of the market. And it is part ofthat wealth transfer that's happening when you look at thedemographics behind who owns farmland. A profit can also be made byutilizing the land in numerous ways. Approximately 39% of the911 million acres of farmland across the US is rented out tofarmers, and 80% of that rented farmland is owned by landlordswho don't farm themselves. For a lot of non-farmers whopurchase property, they may then hire somebody to farm theproperty for them. They may lease the property to be farmedby others. And leasing is actually often a very goodstrategy for farmers if it's a well structured lease. Whatwe're seeing right now on Midwest cropland cap rates, it's close to two and a half rightnow. And so you go buy a farm and you put that cash rentallease in place, you're going to be looking at about 2.5 percentreturn on your capital. In some cases, there are taxincentives that incentivize landowners to have farmingoccurring on their land. And that is giving them a tax breakfor essentially for the work that the farmers who are leasingfrom them are doing. But it can in some cases, mean that te farmers get a break on the lea e price as well.
The involvemet of private landowners has had a significant impact on farmers n the United States. Some argue n its support, suggesting that te process of leasing farmlands h s given new opportunities fr farmers who wouldn't normally e able to afford to far One of the biggest barriers forincoming farmers is the high cost of farmland. And one wayaround that is if you can have a good lease agreement with alandowner, you can farm successfully without having thatinitial outlay of cost. Young farmers are just as happyto lease the land because whether you are young or old,it's a business, right? The business of farming is becomingmore and more specialized. There are the people who concernthemselves with what to plant. There are the people who do theplanting, to own the machines, and work the machines. And thenthere are the people that market the produce. So efficientfarming is not one person that's doing the whole thing. Those who are against the ideaworry that new farmers can't compete with the likes of BillGates when it comes to acquiring land. People are swooping in thatdon't even live in this community and land grabbing.They can live in California and be able to purchase propertyhere in our city just like that. But somebody that lives here,that works here, that cuts the grass next door because that lothasn't been cut in a year, that picks up the trash on thestreets. They attempt to purchase property and they haveto go through hoops and hoops and hoops. With increasing competition onland and increasing values of land, it really puts farmers ina challenging position because they are not competing againstindividuals with the same income as them.
I pursued the purchase of a 10acre farm here a year ago this month. And the owners ask for$1.75 million right for the property in Kentucky. $1.75million for 10 acres. I couldn't afford that, you know, but adeveloper swoops right in and is able to take that offer, youknow, that opportunity right out from under me, because theycould. And while leasing might soundlike a good idea on paper, it often puts farmers in a trickyspot. The problem with leasing is thatit really doesn't give farmers the long-term security that theyneed to invest in their business. If someone is saying,well, we're going to sell the land, now, you have the optionto stay or you could leave, that can put farmers in a reallytricky spot. In some areas, the engagement ofprivate landowners has also led to soaring housing prices andcost of living. When you look at these ruralcommunities. There's definitely winners and losers in terms ofvarious parts of the country. When you get into theMississippi Delta, for instance, where they've lost a lot of thetobacco industry or the cotton industry that has evolvedthrough the years, you've seen some of these towns reallystruggle and they've lost their industry and that's created alot of poverty in some areas of agriculture. The jury is out on whetherprivate landowners are a force for good or bad for agriculture.But more farmland is expected to make its way to the market inthe future. When you look at the demographics aroundwho owns land, it's impractical to think that farmers are goingto buy every acre that transitions over the next 20years. We think in some form or fashion, about 50% of thefarmland in the US will turn over over the next 25 years. With this time,
I would say thatthe jury is out on whether or not large purchases by the ultrawealthy is a good or a bad thing. But I honestly do believethat having large landowners with the ability to look longterm at the land and do what's right by the land, and maybe bein a position to say lease the land to incoming farmers ataffordable rates, that could all be positive. And so I'm hopefulit can be that. There are fewer and fewerfarmers with every US Ag Census and there are a slight increasein the number of young farmers but really at this point notenough to replace the farmers who are leaving the industry. Sowe need more young farmers and we really need to support themby making access to land possible.