By Frank Giles
A rally cry in agriculture that rings true in recent years is: “Food security is national security.”
This mantra is often used in relation to trade disruptions caused by imports of agricultural products from foreign countries that cut into the profitability of U.S. farms. This is especially true for Southeastern specialty crop growers who have seen their markets slashed by imports from countries like Mexico and Peru. According to the U.S. Department of Agriculture (USDA), the United States imports 60% of its fresh fruit and 40% of its fresh vegetables. And the numbers are climbing.
The thinking is that we don’t want to become dependent on foreign countries to feed us. Hence, food security is national security.
How Land Factors In
In recent years, more policymakers are thinking more traditionally about national security as foreign investment in farmland has been on the rise. This is especially concerning when those foreign countries are considered adversarial in nature to America. Much of the concern has focused on purchases of farmland from China, especially near U.S. military bases.
One of the key situations that started raising alarm bells around the issue was plans by Chinese food manufacturer Fufeng Group to purchase 370 acres of land for a corn milling plant in 2021. The site is 12 miles from the Grand Forks Air Force Base. Ultimately, the city of Grand Forks, North Dakota, denied building permits after the Air Force sent a letter to Congress calling the purchase “a significant threat to national security.”
Then, in 2023, a Chinese spy ballon that made its way across America while flying over military bases put the issue firmly in the public eye. These two events have caused policymakers and state legislators to act on farmland purchases by foreign countries, with a focus on those considered hostile to the United States.
Tracking the Issue
All the attention has created more interest in how foreign land is purchased and monitored. In June, Daniel Munch, an economist with the American Farm Bureau Federation, provided an extensive look at the process.
Munch noted that the formal process for reviewing foreign investment and tracking existing ownership is limited. Under the authorities granted to it by the Agricultural Foreign Investment Disclosure Act of 1978, USDA is required to track information pertaining to foreign ownership of U.S. agricultural land. Successful monitoring of investments and enforcement of the law by USDA, however, has been challenging.
The Government Accountability Office recently provided recommendations outlining how USDA can improve data collection and processes. Though USDA plays an important role in tracking foreign-owned farm, ranch and forest land, the U.S. Treasury Department Committee on Foreign Investment in the United States (CFIUS) is the primary entity authorized to review and potentially block transactions involving foreign investment.
Calls to increase scrutiny of foreign investment have spiked at various times in history. These investments can cover more than just land purchases. The creation of the CFIUS was spurred by the Cold War. In the 1980s, when Americans became concerned Japan was going to take over the emerging technology sector, more scrutiny and protections were added.
The Foreign Investment and National Security Act (FINSA) of 2007 further strengthened CFIUS. FINSA provided statutory authority to many CFIUS practices and required more rigorous reporting to Congress, reflecting the increasing complexity and importance of national security considerations in foreign investment reviews.
Starting in 2008, CFIUS was required to release annual reports to Congress to enhance transparency and accountability regarding its activities. In his analysis, Munch noted that CFIUS has received more notices, conducted more investigations and put in place more mitigation agreements in recent years as compared to when reporting began in 2008. Investigations are up by 700%.
Under CFIUS, the President of the United States has the authority to block transactions, but only seven have occurred since the process began. Six of those actions have come since 2008.
In 2018, Congress and the Trump administration enacted the Foreign Investment Risk Review Modernization Act to address growing concerns about national security risks posed by foreign investments in critical U.S. industries and technologies, which can include significant agricultural assets. The law expanded CFIUS’s authority, allowing review and a broader range of transactions. It also required mandatory reporting for some transactions involving certain critical technologies.
The U.S. secretary of agriculture has not played an active role in CFIUS, but growing concerns about foreign land purchases and the link between domestic food production and national security prompted Congress to add the secretary of agriculture to participate in CFIUS reviews on a case-by-case basis involving land, biotechnology and the ag industry. This was passed in March under the Consolidated Appropriations Act of 2024.
So, the move is afoot to increase scrutiny of agricultural lands by regulators. The new farm bill under development also has proposed provisions which would step up monitoring of foreign agricultural land transactions.
In early July, the U.S. Treasury Department announced in proposed rulemaking an expansion of its reviews of land purchases near military bases. This action would add 56 facilities across 30 states to its review list. It would expand CFIUS jurisdiction to about 227 military installations.
The proposed rule would impact land deals within 1 mile of some military sites up to 100 miles, determined by the sensitivity of the military installations. Treasury officials say the rule would greatly expand the reach of CFIUS to maintain a sharp focus on national security.
By the Numbers
Munch also published a deep dive last year on foreign agricultural land investments. He noted that the very nature of classification of farmlands and integrity of data points make it a very complicated process to understand just how much U.S. farmland is owned by foreign investors and who they are. The regulations require foreign persons who buy, sell or gain interest in U.S. agricultural land to disclose their holdings and transactions to USDA directly or to the Farm Service Agency office where the land is located. Failure to disclose this information may result in penalties and fines through USDA investigative action. Maximum civil penalties of up to 25% of the fair market value of the interest held in land can be levied for those who fail to comply.
These data rely on self-reporting, which makes a truly accurate number more elusive. But Munch took USDA’s report based on 2021 data to illustrate some numbers. More than 40 million acres of farmland are owned by foreign investors. That represents 3.1% of all privately held agricultural land and 1.8% of all land in the United States.
Canadian investors own the largest portion of foreign-held U.S. agricultural land with 31% (12.8 million acres), representing 0.97% of all U.S. agricultural land. Following Canada, investors from the Netherlands, Italy, the United Kingdom and Germany own 0.37% (4.9 million acres), 0.21% (2.7 million acres), 0.19% (2.5 million acres) and 0.17% (2.3 million acres) of U.S. agricultural land, respectively.
What about China? Based on the USDA data, China owns about 383,000 acres, which is less than 1% of total foreign-owned agricultural land. But proponents of stricter scrutiny argue that it doesn’t take much land purchased in the right sensitive area to pose a national security threat. The political fury over Fufeng Group’s attempt to purchase only 370 acres near the North Dakota Air Force Base is a prime example of that.
State Actions
While federal regulators up the monitoring and scrutiny of foreign land purchases, Southeastern states have taken action to address the issue. Last year, the Florida Legislature passed SB 264, which calls out countries considered to be hostile. It generally restricts the issuance of government contracts or economic development incentives to, or real property ownership by, foreign principals. Those countries include China, Russian, Iran, North Korea, Venezuela and Syria.
Florida Commissioner of Agriculture Wilton Simpson released the following statement when the bill passed: “Food security is national security, and we have a responsibility to ensure Floridians have access to a safe, affordable and abundant food and water supply. China and other hostile foreign nations control hundreds of thousands of acres of critical agricultural lands in the United States, leaving our food supply, our water quality and our national security interests at risk. Restricting China and other hostile foreign nations from controlling Florida’s agricultural land and lands near critical infrastructure facilities protects our state, provides long-term stability and preserves our economic freedom.”
The bill was signed into law. Last year, a federal court refused to block the law, but earlier this year the Eleventh Circuit Court of Appeals temporarily halted the enforcement of legislation through an injunction. The court ruled federal law (discussed earlier in this article) preempts state action in this regard.
Alabama passed HB 379 during its legislative session last year. Original language heavily targeting China was softened, and the bill made its way to the governor’s desk.
“From our forests to our farmland, Alabama is blessed with an abundance of highly valuable natural resources that must be protected. We also have a large military presence, and Alabama will always do our part to put the security of our country and our people first,” Gov. Kay Ivey said of the law. “The simple fact of the matter is that foreign governments have no business owning land in Alabama, and I am proud to sign this bill and ensure that will never be the case going forward.”
Georgia passed its own version of the law during this year’s legislative session. Proponents say the Georgia law was written more narrowly in hopes of avoiding legal challenges like in Florida. The bill bars foreign agents of countries that have been designated as a foreign adversary by the U.S. Secretary of Commerce from buying farmland or property within 10 miles of a military site. It does not apply to residential property.
More Legal Wrangling to Come
With tightening federal scrutiny and more states taking action to restrict foreign purchases of agricultural land, whether it be to support domestic agriculture or over concerns about military security, this is an issue that will continue to be on the front burner for some time to come.
Go to https://is.gd/LandPurchases and https://is.gd/ByTheNumbers to read Munch’s detailed reports.