Bill would restrict foreign purchase of local farmland

From small plots to vast ranches, California’s farmland attracts investment from all over the world. But as drought and climate change provoke anxiety over water and natural resources, state legislators are proposing new restrictions.

State Sen. Melissa Hurtado, D-Sanger, introduced a bill April 24 to bar foreign governments and government-controlled enterprises from purchasing agricultural land in California beginning next year. Senate Bill 224 would also require California to track foreign-government ownership of farmland in the state and publish the records in annual reports.

In announcing the bill, Hurtado’s office said it “puts California in control of its food-supply chain by preventing foreign governments from purchasing agricultural land, and sets reporting standards to gain a better understanding on foreign ownership of California’s resources.”

Hurtado said the bill is needed to keep too many California farms from falling into the hands of foreign governments, which then control the water and energy resources that come with the land. In her Central Valley district, pressures such as onerous regulations and water scarcity have driven farmers to sell.

“They were struggling to stay in farming,” she said in an interview, adding that investors were “making offers that are just kind of hard to say no to.”

Other U.S. states are considering similar measures, driven by heightened concern around water supplies in Western states and national security risks posed by countries such as Russia and China.

“This thing has exploded,” Micah Brown, staff attorney at the University of Arkansas’ National Agricultural Law Center, said at a March forum held by the U.S. Department of Agriculture. “These bills are just dropping like crazy.”

Fourteen states already have varying laws restricting foreign investment in farmland. Within the past few years, more than a dozen states have created new bills to restrict foreign land purchases, bringing the number of states to either pass or propose restrictions to 29.

Other countries have also passed similar laws to ensure domestic control over natural resources.

In the U.S., there is no federal law preventing foreign companies or governments from purchasing agricultural land. According to the USDA, there has been an uptick in foreign investment in U.S. farmland over the past decade, though overall ownership remains a small fraction.

As of Dec. 31, 2021, foreign investors, including private companies, owned about 3% of all privately held agricultural land in the U.S. Nearly a third of that is held by Canada, with the Netherlands, Italy, the United Kingdom and Germany accounting for roughly another third of all foreign-owned farmland.

Countries the U.S. government lists as posing national security risks own relatively little land, though some deals, such as Chinese purchases near U.S. Air Force bases in Texas and North Dakota, have garnered national attention and prompted calls for legislation.

SB 224, the Food and Farm Security Act, would prohibit new purchases of California farmland by foreign governments but would continue to allow private investment from foreign companies and individuals. It would allow foreign governments that already own land to keep it.

Last year, a similar version of the bill passed the California Legislature with unanimous support but was vetoed by Gov. Gavin Newsom, who said its data reporting element was redundant to information collected by federal agencies.

Foreign governments must report interests in agricultural land to the USDA. The proposed California law would require the state government to track similar data, but would go further by compiling information on foreign ownership of water rights and energy facilities attached to farmland.

“We’re living in a time when we have water challenges around the world,” Hurtado said. “There’s only so much arable land around the world, and it’s increasingly shrinking.”

The state senator emphasized that California needs to control its water resources as other nations may seek state lands to cultivate thirsty crops without burdening their own water supplies. Saudi Arabia’s cultivation—and export—of alfalfa in Arizona, using water from the dwindling Colorado River, has become a high-profile example.

“This bill is about protecting agricultural land,” Hurtado said, explaining that it is also meant to protect “our ability to continue feeding the world, because I think at the end of the day that’s going to bring stability for everyone.”

The California Farm Bureau has not taken a position on the bill. “Because of the complexities of our membership, I think you’re going to have really different opinions on this,” said Chris Reardon, Farm Bureau’s director of government affairs. “Some are supportive (of the bill), and some oppose it.”

Dennis Albiani, policy advocate for the California Seed Association, said he is concerned the bill could curtail research investment. “As an industry that is worldwide, we’re worried some of the complex financial agreements we have on research projects with universities that are government-funded” could be impacted, he said.

John Moore III, a fourth-generation farmer-turned-real estate broker from Kern County, thought the bill was “well-intentioned.” But he said farmers should be able “to do with their land whatever they wish. If that means selling to the highest bidder,” he said, “they should have the ability to do that.”

Another concern brought up by farm and business groups is that the bill could have unintended consequences, such as retaliatory trade laws or other measures in countries where California conducts trade or has investments.

CalPERS, the pension fund for California state employees, for example, is invested all over the world, and foreign governments similarly have pension funds invested in California that would fall under the scope of the bill.

“There’s a lot of ‘what-ifs,’” Hurtado said.

She noted that other countries are making their own laws to restrict foreign land purchases and secure their resources regardless of what California does. “Any country has the ability to do something similar—to implement something of the same nature—whether this bill gets through or not,” she said.

In Canada, for instance, some provinces have long placed restrictions on foreign ownership of farmland. This year the country passed a law barring foreigners from purchasing residential property for the next two years. Hurtado said inserting a similar sunset clause in the California bill would be “reasonable,” but emphasized that the state needs to do something.

The bill passed the Senate Agriculture Committee last week. As it goes through the legislative process, Renee Johnson, agricultural policy specialist for the Congressional Research Service, said the barrage of new state laws on foreign farmland purchases could lead to federal legislation.

“When a lot of states take on a lot of different actions,” she said, “it kind of prompts a federal congressional response.”

(Caleb Hampton is an assistant editor of Ag Alert. He may be contacted at champton@cfbf.com. Christine Souza, assistant editor of Ag Alert, contributed to this story.)

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Source: Ag Alert

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