When Arab oil-producing states jacked up their oil prices, rumors of a petrodollar takeover of American farmland spread faster than a wellhead fire. But a recent study conducted by the US Department of Agriculture (USDA) indicates that what early reports pictured as a tidal wave of foreign investment has turned into something more like a dripping faucet.
And, ironically, this gentle drip of new overseas investment in American farmland may result more from aggressive US salesmanship than from foreign initiatives: According to a recent USDA study by attorney Peter DeBraal and economist Alex Majchrowicz, the USDA's farmland-registration and public-disclosure requirements have resulted in US real estate firms obtaining the names of foreign investors and trying to sell these investors more farmland.
The USDA study, based on disclosure forms filed from February 1979 to December 1980, shows that foreign corporations and individuals now own farmland in every state except Rhode Island. It pinpoints the most popular states as Maine, Hawaii, South Carolina, Utah, and Arizona, each with at least 2 percent of all privately owned agricultural land under foreign ownership.
The USDA reports that some 80 separate countries have stakes in US farmland. Three-quarters of the holdings are tied to Canada, Britain, West Germany, the Netherlands Antilles, Luxembourg, and the Netherlands -- in that order.
The USDA notes that 1.2 million of the 7.8 million foreign-owned acres were purchased between February 1979 and December 1980. Total overseas ownership as of December 1980 was put at 7.8 million acres -- or just 0.6 percent of the nation's 1.359 billion acres of privately owned agricultural land. Even allowing for error and deliberate attempts to conceal foreign ownership, Mr. DeBraal concludes, "On a nationa level the foreign share is too small to have any measurable impact."
The first concrete move toward cutting off the suspected takeover came in 1978 when Congress passed the Agricultural Foreign Investment Disclosure Act. This act required all foreign individuals or companies with more than a 5 percent interest in US farmland to register with the USDA. The result was the first source of accurate information on the extent of foreign ownership.
Under the new law, the required disclosure forms are made public. Almost immediately, the newly available information seemed to confirm the worst suspicions. For instance, in California, a state particularly worried that prime cropland was falling into foreign hands, disclosure forms led straight to Arab countries and to other countries whose privacy safeguards could conceal Arab ownership.
South Carolina-based Kremco corporation, with $2 million invested in California farmland, turned out to be owned by Kuwait Investment Company of Kuwait. Another $1.8 million in California farmland had been purchased by the Swiss-registered group of Buendnis Anstalt, Genuine Anstalt, and Mezen Anstalt. A $4 million California holding was traced to the Netherlands-based Juve Investment Company.
But while the USDA points out that Americans still own 99.4 out of every 100 acres of private agricultural land, its researchers are continuing to monitor the situation. To keep track, stiff penalties are being used to force foreign owners to comply with USDA reporting requirements.
A preliminary Iowa State University study adds another concern: absentee foreign owners may skimp on land improvements and soil conservation measures.
The USDA predicts that states may consider tightening restrictions on foreign investment in US farmland. New restrictions could seem particularly attractive to the 10 states most affected by foreign ownership -- Maine, Texas, California, Georgia, Florida, south Carolina, Tennessee, New Mexico Colorado, and Montana -- which together account for 60 percent of all foreign holdings.