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Fields of Gold

Fields of Gold CoverPublished by Cornell University Press, 2020, $21.95 paperback, 147 pages plus 64 more of references and index
review by Jack Kittredge

This analysis of the current interest in treating farmland as an investment could not be more timely. Although the most recent boom in land investment peaked during the years 2008 to about 2014, following the international food crisis of 2007, there is still a very active market for farmland based both on the value of food it can produce and also the resources it harbors. This book looks at that boom in farmland investing in the US and in Brazil, the latter in part because you learn much more by studying the same phenomenon in two places — so you can compare and contrast — and in part because of the very size of Brazil and the extent to which capital is attracted to land investment there.

And don’t worry, the farms this book deals with are not those of you and me, a few acres or even a few hundred acres. These are huge operations, thousand of acres, and mostly in the Midwest or plains states. They are valuable for the worth of the crops they can produce, yes, but also for the rising prices they generate in today’s booming market.

The land investment business is not exactly like a stock market. Although huge amounts of money are involved, many participants are wealthy individuals who prefer to remain anonymous. Publicity can lead to unexpected complications and perhaps interfere with the profitable exploitation of a land acquisition. To assure full disclosure among her sources, Fairbairn has guaranteed their anonymity and taken care to change identifying features of people and companies to adequately disguise them.

Probably the most memorable surge of interest in the value of farmland, at least in the US, came in the 1970s. The Russian grain harvests had been very poor in 1971 and 1972, and the Soviet Union was forced to buy 10 million tons of US grain in July of 1972. Despite efforts to mask it, such a large purchase caused grain prices to soar, driving up the price of farmland. Bankers pushed Midwestern farmers to borrow based on the new, higher value of their land and to use the money to buy more of it. The bubble lasted a few years, but by the end of the decade interest rates had shot to 21 percent and grain prices fell. With land prices now plummeting, many farmers were in over their heads. When the banks called for payment of the loans they were not able to pay and lost their land.

Fairbairn begins her history of farmland investment in the US in the early 20th century, but starts by recognizing that all US land was originally the territory of various indigenous peoples and it was taken from them by a violent, racialized dispossession. It is good to have at least a formal recognition of that fact and that unpaid debt when reading this book.

The cycle of boom and bust in land values are well illustrated by an inflation-adjusted graph of the average value of an acre of farmland since 1880. The booms around World War I and after the Russian grain purchase of 1972 are obvious, as are the corrections that took place, first with the Depression and Dust Bowl years of the 1930s and then after the high interest years around 1980. What is somewhat more surprising is the long slow rise after about 2000 that has brought prices up to about $3000 per acre.

As you might guess from who published it, this is a scholarly book and a good deal of it is devoted to examining who is financing land, and how. Initially life insurance companies were a major financer of land, given its long term value horizon which more closely approximated that of insurance policies. After the New Deal, government began to play a major role in holding farm mortgages, especially after World War II. Banks have played a larger and larger role in the last 25 years or so, along with individual investors.

Fairbairn analyzes various efforts by financial companies to put together packages that would make farmland a more popular investment for new investors, some more successful than others. One of the problems of farmland is that it does not come in the huge deals that, say, office buildings represent. The average farm in this market goes for around $5 million. If an institutional investor wants to invest $100 million, which is not an unusual amount, it has to end up with 20 farms. And for every farm it buys, it is likely to consider 5 other ones. That is a huge amount of analysis and inspection work and takes a lot of time. So an investor who decides to get into farmland may not actually purchase the final farms it will own for a year or more. During that time, the prices of those farms may go up.

In the section on Brazil, we learn of the incredible inequality of Brazilian land ownership. Land seized from the initial inhabitants when Portugal colonized Brazil was granted to rich families on a non-inheritable use basis, not ownership. The result was that land was mostly in the form of coffee and sugar plantations, or cattle ranches, and the vast majority of the population was frozen into landlessness and had to labor on these large latifúndios. This policy endured until Brazilian independence in 1822, after which land could be sold (but not acquired by squatting, as was happening in the US under the Homestead Act). So ownership continued to be highly concentrated.

In her conclusion Madeleine Fairbairn discusses the unique nature of land. As opposed to other investments, land has a tremendous productive capacity of its own that is independent of finances. A few acres can make the difference between life and death for families. That value needs to be somehow recognized and respected by owners. Three possible solutions are analyzed: 1) Corporate Codes of Conduct, where social and environmental rules are imposed on owners, 2) Campaigns Targeting Investors where middle class investors are asked to use their power as small scale owners to require that social and environmental benefits be furthered by the pension or mutual fund owning the land, and 3) Community Based Farmland Investment where Land Trusts or Real Estate Investment Companies are pressured when managing land to assure that the interests of the entire community be represented in land use policies.

Each of these approaches has problems, of course, which Fairbairn touches upon. But she leaves us with a good understanding of the various ways in which land is more than another commodity to be packaged for financial interests and how landless people can insist that the unique qualities of land as a sustainer of life can be respected even in today’s heated real estate markets.