Insurance companies build portfolios of US farmland. Reports of mismanagement rise as `absentee landlords' dawdle over resales; erosion a concern
As many of them did in the depression, life insurance companies are quietly becoming America's leading landowners. Agricultural land owned by the nation's largest insurers has tripled over the last five years to more than 5.2 million acres in the United States, according to a study released this fall by the Center for Urban and Regional Affairs at the University of Minnesota.
Farm leaders from the Midwest and West are concerned that many companies are negligent in overseeing renters. They say that the insurance giants hire short-term tenants in search of short-term profits, and that this could irreparably damage the nation's farmland.
``The big insurance companies are the ultimate absentee landlords,'' says Mark Schulz of the Land Stewardship Project, based in Stillwater, Minn., which helped fund the study. ``What happens to farmers in Rice or Dodge Counties here in Minnesota is of little concern to executives who live in Hartford, Conn.''
Companies admit that their landholdings are increasing, mostly through Midwestern foreclosures, at a rate of about $300 million a year. Most say they are attempting to sell the land, but there are few takers. Though they monitor renters, cases of poor farming occasionally slip through the cracks, the insurers say.
The Travelers Companies owns the largest share of farmland, with more than 1 million acres. The John Hancock Mutual Life Insurance Company is second, with more than 900,000 acres. The Prudential Insurance Company and Metropolitan Life Insurance follow close behind. A dozen others have smaller holdings.
``It just isn't a high priority for us to sell this land right now, we just don't have the manpower,'' says Paul Rennie, second vice-president at the agricultural investment department of John Hancock. ``We've been selling some but acquiring more.''
When land prices were spiraling upward in the 1970s, the companies lent heavily in the Midwest, and also bought farmland in California, Florida, and elsewhere. After values plummeted several years ago, they were forced to foreclose, along with banks and the Farm Credit System.
But unlike the others, most insurance companies have been holding on to the land. Rural banks fail if they keep land too long, but insurance companies have the resources to keep the land longer. As a result, most seem to be waiting to see whether land prices will rise.
``The insurance companies are gambling that they'll get more money out of the land by holding it,'' says Prof. Philip Raup, a land-value specialist at the University of Minnesota. ``The transfer of land was at a peak last year ... but no one really knows yet what the effect of the drought will be.''
Farm leaders like Chuck Hassebrook, a policy analyst at the Center for Rural Affairs in Nebraska, are concerned that as company ownership increases, more land will be at risk. Mr. Hassebrook says some companies, like Travelers and Metropolitan Life, have been unresponsive to local farmers' complaints about erosion and poor land management.
Several highly publicized cases have helped farm groups nudge some of the companies to impose use conditions on renters.
After John Hancock foreclosed on an organic farm owned by Glenn Hauck in Wabasha County, Minn., in 1985, a tenant farmer moved in and bulldozed carefully landscaped terraces. When a survey by the US Soil Conservation Service showed that erosion had increased by 10 times, neighbors started a publicity campaign. Hundreds of letters were written to the company, and newspapers printed before-and-after pictures, and the land was sold.
Today, Hancock and Metropolitan Life have signed agreements with farm groups to monitor more closely the land they own. Renters must file erosion plans with the Conservation Service, and more company representatives have been sent into the field.
``We've already written the interest off on these properties and we're just trying to get the principle back,'' says Leo Rasmussen, vice-president of agricultural investment at Metropolitan Life. ``All leases we sign say good land practices must be followed.''
In California, where most agricultural land owned by the companies was bought as direct investment, there are other problems, critics say. The Golden State leads the nation, with $418 million in company-owned land.
Don Villarejo, executive director of the Davis-based California Institute for Rural Studies, says his state has seen labor problems crop up as a result of insurance company involvement.
He claims that when workers at a 10,000-acre operation owned 99 percent by Metropolitan Life began a strike last year, all the workers were fired by a management company. Unlike the insurance companies, a local owner would have had more sensitivity, he claims.
``The Snoopy image that Metropolitan Life likes to portray just isn't true out here,'' Mr. Villarejo says. ``It's become a hammer-and-fist image.''
Metropolitan Life's Mr. Rasmussen comments that the company is doing everything possible to manage its land well and that, in many instances, especially in the Midwest, companies do a better job than the financially strapped farmers they replace.
Insurance companies, along with legislators and rural groups, are groping for ways to solve the problem. One of the largest holders, Prudential, has been selling off any acreage it cannot manage efficiently.
``We immediately make a decision that none of the land met our investment portfolio,'' says Les Horsager, a Prudential vice-president in New Jersey. ``In some states we can do a first-class job of management, but we know that we can't make any money on small farms.''
Some local governments are taking action as well. In the Midwest, some states like North Dakota, Nebraska, and Minnesota have imposed caps of three to 10 years on the amount of time insurance companies or other corporations can hold land. In Iowa, groups are studying ownership patterns in specific counties and have made presentations to legislators.