By FRANK W. GOUDY

Illinois' foreign farmers

Concern over foreign ownership of U. S. farmland led Congress to pass legislation in 1978 requiring nonresident aliens and foreign business interests to disclose their ownership of American agricultural lands. The Illinois General Assembly passed a similar law in 1979. Using federal and state data developed from these disclosure reports, Frank W. Goudy examines the demand of foreign individuals and corporations for U.S. farmland in general and Illinois farmland in particular. In order to gain access to Illinois Department of Agriculture (IDA) records, the author was required to sign a confidentiality sheet, pledging he would not divulge the names of foreign landholders. He has therefore made no use of IDA disclosure reports beyond the department's own published summaries. All companies and individuals mentioned in this article have been identified previously through media reports

"RUMORS of foreign buying of farmland in a neighborhood touch off more excitement than the discovery of tracks made by Big Foot," states a December 1977 article in Farm Journal. Since the mid-1970s, attitudes of a nearly xenophobic nature have surfaced in regard to reports of increased foreign investment in U.S. farmland. These sentiments, which have not been limited to a single state or region, remain strong today. Concerns over foreign ownership have centered on its possible effects: consolidation of American farms into larger holdings accompanied by a decrease in the number of family farms, the mismanagement of land resources by absentee owners and the potential for foreign control over essential elements of the domestic agricultural economy.

The fear of aliens seizing our precious soil is not a new phenomenon in this country. During the last half of the 19th century, foreign investors were attracted to such land-related investments as cattle ranches, mortgage companies and land-grant railroads. Although foreign holdings did not reach significant proportions nationwide, they were important in some regions and attracted strong resentment on the part of local citizens in a number of states. Opposition to foreign investments in land led 13 states — including Illinois in 1887 and again in 1897 — to pass laws restricting such ownership. Congress also acted in 1887 to limit ownership of land in U.S. territories to citizens.

According to one estimate for the years prior to World War I, foreign individuals and companies controlled 30 to 35 million acres in the U.S.; there was no precise count, however, and evidence suggests the amount was exaggerated. Concern over foreign ownership subsided after the turn of the century. Farmers were enjoying greater prosperity, and although there continued to be a heavy flow of foreign capital into the U.S., investors were not concentrating on farmland. With protective laws on the books and an apparent decrease in land purchases by foreigners, the volatile issue of land ownership subsided for nearly three-quarters of a century.

By the mid-1970s, however, an increased demand in world markets for U.S. land was being reported in national magazines such as Newsweek, Time and U.S. News and World Report. Farm Journal noted the closing of a sale involving 162,000 acres in Wyoming purchased by unnamed foreign investors. And a 1977 Saturday Review article entitled "Invasion of the American Heartland: A report on how and why foreign investors are gobbling up choice U.S. farms," cited several foreign land acquisitions including Prince Liechtenstein's 10,000-acre farm in the Red River area of Texas, the Busonis' 12,000-acre Norris farm in Illinois, and a Hamburg-based holding company's 14,000 acres of prime mid-western farmland.

The basic conclusion being reached was that foreign investors, using land as a speculative hedge against inflation or a safety net in case of political instability, were bidding up the price of land beyond the reach of local farmers. Certainly there were few investment opportunities in the 1970s as lucrative and safe as American farmland. While the Standard & Poor's Composite Index of 500 stocks rose 43 percent from 1970 to 1980, and the Consumer Price Index increased 112 percent, the average value of the nation's farmland soared 261 percent. In Illinois, according to data from the U.S. Department of Agriculture (USDA), the average value of farmland went from $490 per acre in 1970 to $2,004 per acre in 1980 an increase of 309 percent.

State and federal laws

The attention given to foreign land-holdings and the lack of detailed knowledge as to their extent spurred the 95th Congress to pass legislation to monitor this alleged problem. While a variety of measures were introduced, including proposals to restrict foreign ownership, the bill that eventually passed was the Agricultural Foreign Investment Disclosure Act of 1978 (AFIDI) (P.L. 95-460). The act requires foreign nationals owning at least a 5 percent or more interest, except a security interest, in agricultural land to report to the U.S. Secretary of Agriculture. The report includes: name, address, citizenship of owner, location, acreage, price paid, intended use of land and other selected information. The act does not prohibit or limit aliens from buying U.S. agricultural land.

A similar law, also titled the Agricultural Foreign Investment Disclosure Act (P. A. 81-187) was passed by the Illinois General Assembly in August 1979. It mandates the same reporting procedures as does the federal act and requires these reports (which can be copies of reports filed with the USDA) to be filed with the Illinois Department of Agriculture (IDA). As in the federal act, failure to comply could lead to a penalty of up to 25 percent of the fair market value of the property on the date of the assessment of the penalty. As far as this writer could determine, however, no penalties have been levied in this state. Insufficient staffing in the IDA to monitor all deeds for potential

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violators means that compliance, in effect, is largely a matter of individual and corporate ethics, potential monetary penalties and citizen reports provided to the IDA. Like the federal law, the Illinois disclosure law does not restrict land ownership.

Merely providing a reporting mechanism has not always lessened the intensity of feelings regarding foreign-held tracts of land. These emotions may have been heightened by reports in Illinois local newspapers which identified specific holdings. For example, a March 1980 article in the Mason County Democrat discussed the Illinois Farmland Coalition's identification of the 11,813-acre Norris farm in Fulton County. According to the article, the land was purchased for $18 million by a wealthy Italian family through the Yocara Corporation based in the Netherlands Antilles. Another weekly newspaper, the Fulton County Democrat, noted in October 1980 that the 23,017-acre Meadowlark Farms near Vermont was owned by Amax, Inc., which in turn had a British consortium as one of its stockholders.

Although Illinois' 1897 law limits land ownership by aliens to a period of six years, it is not strictly enforced and does not necessarily prevent indirect foreign investment. For example, shares of stock in a corporation are considered personal rather than real property, and under Illinois law aliens are allowed to acquire and hold personal property to the same extent as citizens. In addition, a land trust can be established in which the foreign beneficiary controls the property through an unrecorded contract with a trustee while still retaining all of the profit and benefits which occur with ownership. Since in a land trust, the beneficiary's interest is considered personal property, an alien can fully own the land without having to sell after six years. (For more about the legal and ideological issues surrounding foreign ownership and land trusts, see Illinois Issues, March 1979, pp. 8-12.)

Legislation introduced in the 1981 General Assembly — H.B. 628, sponsored by Rep. Harlan Rigney (R., Freeport), and S.B. 387, sponsored by Sen. Terry L. Bruce (D., Olney) — would have restricted the ability of foreigners to acquire an interest in Illinois agricultural land after January 1982. Neither of these bills passed, and no similar legislation was introduced in the 1982 "off-year" session. Despite such legislative efforts, the key question remains: To what extent are foreigners buying Illinois farmland?

USDA data collected in compliance with the federal disclosure law reveal that as of December 31, 1981, foreign entities held 12.7 million acres of American agricultural land — or slightly less than 1 percent. Canadian, Luxembourg, French, British, West German and Netherlands Antilles

Table 2 Agricultural landholdings in Illinois (by type of foreign owner)
Type of owner	Reporting forms filed	Acres	Percent total foreign interest
Corporations Trusts Partnerships Individuals	145 58 19 41	87,075 36,161 6,048 9,680	62.7 26.0 4.3 7.0
Total	263	138,964	100.0
Source: Illinois Department of Agriculture, Foreign Ownership of Illinois Agricultural Land, March 1982

interests held 78 percent of these acquisitions. When the total holdings were adjusted to account for partial foreign ownership, the USDA estimated approximately 11.3 million acres, worth about $8.45 billion, to be owned by foreign interests.

Illinois' alien ownership

Among the states, Maine had the largest foreign ownership: 2.6 million acres, of which 2.5 million were owned by three large timber firms. Ten other states, concentrated primarily in the South and West, accounted for an additional 5.97 million acres. Rhode Island was the only state in which aliens had not secured farmland.

Data collected by the IDA after the passage of P.A. 81-187 in 1979 disclose that through February 1982 foreign entities and individuals had reported ownership of 138,964 acres of Illinois agricultural land — or about 0.5 percent of the state's 27.9 million acres of farmland. This total includes reports

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submitted to the IDA of purchases made before the state and federal disclosure laws went into effect.

Of the 102 counties in Illinois, 70 reported some foreign holdings (see table 1). Five of these counties collectively accounted for 72,862 acres or 52 percent of the total: Fulton, 35,407 acres; Williamson, 10,256 acres; Wayne, 9,447 acres; Perry, 8,896 acres; and Saline, 8,856 acres.

Categorized by type of foreign ownership, IDA reports show that 87,075 acres were owned by corporations and 36,161 by trusts — accounting for 123,236 acres or 89 percent of reported foreign holdings (see table 2). According to the IDA, about one-fifth of the 9,680 acres owned by foreign individuals was received by inheritance. Categorized by degree of foreign ownership, the reports show that only 49,687 acres — or less than 0.2 percent of the total farmland in Illinois — are totally owned by foreigners (see table 3). This figure includes 40,437 acres owned by foreign business entities and 9,680 acres owned by individuals (including 430 acres shared with family heirs who are U.S. citizens). U.S. business entities having a foreign interest of 5 percent or more held the remaining 88,847 acres or 64 percent of the reported total.

Disclosure of the exact share held by aliens in U.S. firms is not required in either the federal or state AFIDA reports. Such an interest could be relatively insignificant, or it could be an important factor in the control of the corporation — and thus of the farmland in question. British Petroleum, for example, was identified in a June 3, 1981, Wall Street Journal article as having a 6.8 percent interest in Amax, Inc. Meadowlark Farms, Inc., a large owner of farmland in Illinois, is a subsidiary of Amax, Inc. As a result of this partial interest, British Petroleum was required to report its "ownership" of American farmland, even though it does not control the land in any meaningful way. While British Petroleum's interests seem relatively insignificant, a United Press International release indicated that as of December 1980, an estimated 67 percent of the foreign-owned land in Illinois was held by foreign corporations through coal company subsidiaries.

In terms of the nationality of alien landholders, West Germans and Canadians predominated in the individual holdings category (see table 3).

Table 4 Foreign agricultural ownership reports in Illinois through February 1982 (by year of purchase)
Year	Report	Acres
1981-2/82 1979-80 1975-78 1970-74 Prior 1970	64 100 46 18 22	12,893 21,882 33,103 2,738 3,459
Not reported or purchased over a period of years	13	64,889
Total	263	138,964
Source: Illinois Department of Agriculture, Foreign Ownership of Illinois Agricultural Land, March 1982

According to IDA, nearly 90 percent of Canadian individual owners inherited the land. Among foreign shareholders in U.S. business entities, England was the predominant country of origin; U.S. firms with British interests accounted for 70,661 acres. Among foreign business entities, firms based in the Netherlands Antilles held 18,901 acres followed by West Germany and the Cayman Islands with 8,943 acres and 3,778 acres respectively.

Why would the Netherlands Antilles or the Cayman Islands be the country of origin for such relatively large alien holdings? It is doubtful that the Caribbean islanders are purchasing the land themselves. Their bank secrecy laws have long provided a popular haven for investors who seek to remain unidentified. Financial institutions such as Continental Illinois and Northern Trust have often been mentioned as playing an intermediary role in such purchases so that there is no direct seller-to-buyer contact.

Concerns that foreign land purchases escalated during the 1970s appear to have been justified. IDA reports show that during the nine years from 1970 through 1978, recorded foreign acquisitions in Illinois amounted to 35,841 acres, and in only a little more than three years — from 1979 through February 1982 — another 34,775 acres were bought (see table 4). Many agricultural economists and farm real estate brokers speculated that the high U.S. interest rates and stronger dollar during 1981 might lessen this demand. The fact that 12,893 acres or over 9 percent of the state's total reported foreign holdings

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were acquired during 1981 and the first two months of 1982 attests that demand for Illinois farmland had not yet deminished.

It should be noted that the IDA lacks specific data on the purchase dates of 64,889 acres or 47 percent of total holdings. This acreage was purchased before the state disclosure law went into effect. According to Fred Barrett, statistics bureau chief in IDA's marketing division, some tracts had been owned for a considerable period of time, and no requirement was made to trace the history of such transactions. Other disclosure reports did not give a particular purchase date because the land was purchased by coal companies over a long period of time is needed to carry out a profitable operation, and there was no single purchase date. As new tracts of land are purchased and reported, this type of information will be more specific.

Rates of acquisition

There is no question that foreign ownership of Illinois farmland has increased during the past decade. Certainly, the 138,964 acres of reported holdings as of February 1982 is not to be ignored. USDA research has confirmed that alien-owned tracts have been found to be of similar soil quality as those owned by Americans. Assuming this equal status, foreign ownership of the 49,687 acres in which there is no U.S. interest would mean that foreigners own over $96 million in Illinois farmland, based upon an April 1982 statewide average of $1,940 per acre. This figure does not take into consideration the 89,277 acres in which foreign investment amounted to 5 percent or more of a U.S. entity.

It is important to remember, however, that total reported holdings constitute only 0.5 percent of Illinois' farmland, about half the national percentage for foreign ownership and that this percentage would be reduced if the exact foreign share in American firms owning farmland were calculated. Nevertheless, it is important to track the trend of foreign acquisitions. Based upon data for 1976 through 1978, the USDA concluded that about 2.5 percent of all farmland changed hands annually nationwide through voluntary sales and estate settlements; Illinois was found to be nearly identical with the national average. If this same rate were to persist, it would mean that an average of approximately 743,000 acres changed ownership annually out of the 29.7 million acres of farmland in Illinois. If foreign purchases were extrapolated at the observed rate of 34,775 acres over a 38-month period as occurred from 1979 through February 1982, less than 1.5 percent of the 743,000 acres of farmland for sale annually would be bought by aliens.

A July 1981 USDA analysis of the impact of foreign ownership of U.S. farmland stated: "In summary, the quantity of foreign owned U.S. agricultural land is so small that it is unlikely to have either a positive or negative overall impact on agriculture. In areas of heaviest concentration, some communities could be affected." This statement could well apply to Illinois as well as to the rest of the nation. But because foreign ownership could be a serious future problem, it is important that foreign agricultural holdings be carefully monitored and that both the economic and social impacts of such purchases be a matter of continual study.

Frank W. Goudy is an associate professor and librarian at Western Illinois University, Macomb. He recently published an article on foreign ownership of western Illinois farmland in Western Illinois Regional Studies.

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