September 8, 2016
It’s no secret: farmers need land to farm, and lately they are having an increasingly difficult time obtaining it. Today, nearly half of all farmland is rented and many farmers are forced to cobble together plots of land by contracting with multiple landlords in multiple locations. Recently, the U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS) published a report, U.S. Farmland Ownership, Tenure, and Transfer, which sheds some light around the major barriers to land access faced by farmers, particularly beginning farmers, and also explores channels through which farming and non-farming landlords may consider transferring their lands.
This timely report analyzes trends in U.S. farmland ownership and land tenure drawn from USDA’s 2014 Tenure, Ownership, and Transition of Agricultural Land (TOTAL) survey. For NSAC’s analysis of the TOTAL survey results, see our previous blog post.
The ERS report can be generally divided into three major areas of emphasis:
Historic and Current Trends in Land Tenure
Access to land is one of the most important challenges facing the next generation of farmers. ERS’ report analyzes the agricultural economy’s current state of land tenure and turnover, including the demographics of ownership, how agricultural lands are being used by owners (i.e. farming or renting), and what – if any – owners’ long-term plans are related to their land and eventual land transfer.
From ERS’s review of current and historical data, three main trends emerge:
70 years ago, during the height of the Great Depression, it was common that a farmer might rent 100 percent of their working lands. While in 1935 only 25 percent of farmers who owned a portion of their land, today the majority of farmers (54 percent) own at least part of the land they farm, down from 67 percent in the early 1960s. The percentage of those who own all of the land they farm has held constant at 37 percent, while those farmers who fully rent all of the land they farm has fallen significantly – from 32 percent (1935) to just 10 percent (2012).
As of 2012, the Northeast and Western regions of the U.S. have the highest rates of land ownership (roughly 71 percent), while the Midwest and Plains regions have the lowest (54 and 57 percent respectively).
While these regional ownership patterns give some indication of where renting farmland is most common, additional variation do exist within regions. The regional disparities found in the report are not all that surprising, however, given that the areas identified as having more rented acres are also those regions with higher cash grain production – an industry more commonly associate with rentals.
Similar to the trends we might see in home ownership rates, the ERS report found that younger farmers are significantly more inclined than older farmers to rent part or all of the land they farm. Given the high capital costs and inherent risks associated with farming, it makes sense that young farmers would look to land rental as an entrée into agriculture. According to the report, the money these younger farmers save by renting is often re-invested in other areas of the operation, such as machinery or building improvements.
Other significant takeaways on land tenure include that:
Patterns in landlords’ farmland decision-making
Today, more than one out of every three acres of farmland in the U.S. is rented. Rented acres have decreased by roughly 11 percent over the past two decades, though the number is up slightly (1 percent) since 2012.
Farmers most likely to rent at least a portion of the land they farm, include:
Farmers with small operations are more likely to own the land they farm a compared to larger operations. Small family farms (defined in the study as those with annual sales of less than $350,000) represent 45 percent of U.S. farmland, of which nearly half fully own their lands.
Most rented farmland (80 percent) is owned by landlords who are not actively involved in farming, and who are more likely than farming landlords to acquire land through inheritance. Further, over a third of all rented farmland (118 million acres) is owned by someone who has never been engaged in farming, with another 20 percent (73 million acres) rented from retired farmers.
With a number of aging farmers nearing retirement age, the report projects that 10 percent of all farmland (93 million acres) is expected to be transferred between 2015 and 2019. That might sound like beginning farmers will soon see a lot of land coming available, however, of the 10 percent of farmland predicted to move into transition, 60 percent (55.8 million acres) will be transferred through gifts, trusts and wills. There is significant potential that these inheriting new owners may be non-farmers who are interested in renting or selling the land, however, there is no guarantee that land would be rented or sold to new, beginning farmers as opposed to larger, older farm operations in the area or to developers.
For new farmers deciding whether or not to rent land from a landowner who is not engaged in farming, understanding the decision-making process of the landowner and the relationship the owner expects to have with the renting farmer is key.
According to the ERS report, landlord input on the farm and farmer management varies. In most cases short-term decisions (i.e., cultivation practices and crop choice) are typically left to the sole discretion of the farmer, whereas long-term decisions (i.e., adopting permanent conservation practices or participating in government programs) typically involve the landlord’s input or consent. Farming landlords were found, in general, to be more involved with farm management decisions than landlords not previously or actively involved in farming.
The report also highlights the challenges that come with the recent trend of renting farmland from multiple landlords. Oftentimes in these situations tenants are forced into short-term leases (57 percent of rented acres are renewed annually). Dealing with lease renewals and owner-relationship management can be a particularly onerous task, especially for farmers who must engage with multiple landlords and juggle multiple leases.
The ERS report can serve as a valuable tool for both policymakers and farmers alike. By establishing a baseline of the state of land ownership and land tenure, and utilizing evidence based projects on the future of farmland acquisition in the U.S., we can take meaningful steps forward toward improving access levels.
Due to the aging farmer and agricultural landowner population, transition of farmland is projected to increase in the coming years. However, the vast majority of these land transfers are projected to occur through gifts, trusts or wills – meaning that many young and beginning farmers will still struggle to rent or own farmland. By supporting programs like the Beginning Farmer and Rancher Development Program (BFRDP), which the National Sustainable Agriculture Coalition (NSAC) helped to establish in the 2002 Farm Bill and fund in the 2008 Farm Bill, or the Down Payment Loan Program that NSAC has championed since the early 90s, Congress can help usher in the next generations of beginning farmers and ranchers and ensure a strong U.S. agricultural economy for decades to come.
The full ERS report is available for download at USDA’s website.