Who Owns Farmland in the United States?
In the United States, the ownership of farmland is primarily in the hands of individuals and families, with approximately 2.6 million of them collectively owning more than two-thirds of all farmland across the country. These family-owned farms play a crucial role in the agricultural landscape. On the other hand, a relatively small number of non-family-held corporations, numbering fewer than 32,500, possess farmland, but their ownership accounts for less than 5 percent of the total U.S. farmland. This distribution reflects the diversity of ownership within the U.S. agricultural sector, highlighting the significant presence of family-based agriculture.
Source: USDA ERS, November 2020
The diagram presented above illustrates that the majority, namely 61%, of agricultural land is managed by the owners themselves and not rented or leased. However, it is important to note that a significant portion of this land is only partially owned by the farmer. Frequently, individuals such as cousins, siblings, and even neighbors have joint ownership of the land. In reality, instances in which a farmer possesses complete ownership of cropland constitute a much smaller proportion of the overall land.
“61% percent of U.S. farmland is owner-operated, or owned by its respective farm operator. Eighty percent of rented land (31% of all farmland) is owned by non-operator landlords.”
- USDA Economic Research Service
Source: USDA ERS, November 2020
According to the USDA ERS, while individuals and partnerships own 21% of farmland, a smaller portion is owned by corporations, trusts, or other entities. These companies and trusts are typically established for individuals who have inherited land but no longer reside near a farm. Consequently, it can be argued that professional or semi-professional investors own less than 5% of farmland in the United States.
Can you think of any other market in which professional investors own less than 5% of a multi-trillion dollar industry? Furthermore, why is farmland not more commonly owned by investors?
We believe that there are significant barriers preventing most people from entering this particular asset class. The cost of purchasing an individual farm is often prohibitively high, the asset itself is not easily converted into cash, and finding suitable investment opportunities can be challenging.
Buying Farmland Directly is Very Difficult
Although it has been historically challenging to invest in land directly, it remains an appealing type of asset that has consistently increased in value and provides a potential hedging strategy for capital during periods of economic instability.
This is where AcreTrader steps in - we offer a solution for accredited investors to access the farmland asset class without the usual difficulties and complications. The online process is straightforward - purchase shares of farm or timber land through an entity that owns the farmland. The investor then has the opportunity to receive potential distributions, which are paid through rental income; while the underlying asset of the entity, the land, has the potential to appreciate in worth throughout the hold time.
The above content is not intended to be a comparison between products but is intended for general, educational, and informational purposes only. Any performance noted is historical and there is no guarantee any trends will continue. All investing involves risks, including the complete loss of principal. Diversification does not guarantee a profit or protect against loss in a declining market. It is important for each investor to review their investment objectives, risk tolerance, tax liability, and liquidity needs before investing. Investment vehicles have differences in fee structure, risk factors, and objectives. Investments are considered speculative, involve a high degree of risk, and therefore are not suitable for all investors. Investors are purchasing shares in an entity that will purchase a farm but are not purchasing actual acreage of the farm directly.
Clicking some links in this article will take you to websites independent of and unaffiliated with AcreTrader. The information and services provided on these independent sites are not reviewed, guaranteed, or endorsed by AcreTrader or its affiliates. Please keep in mind that these independent sites' terms and conditions, privacy and security policies, or other legal information may be different.
