The Future is Now

We had resolved not to be all doom-and-gloom all the time now that the farm bill is over. Unfortunately, we think we're pretty good at doom and gloom and besides, certain news items cause our heart rates to go through the roof.

Background: In 1982, Nebraska voters appoved Initiative 300, a ban on non-family farm corporate ownership of agricultural assets in Nebraska. Anybody could still own agricultural assets, but only family farms could use the corporate ownership structure. The primary advantage of incorporation is limited liability. In 2006, a federal judge ruled Initiative 300 violated the US Constitution (dormant commerce clause, for you policy wonks). In 2008, the Center for Rural Affairs and many other organizations tried to pass a new corporate farming ban in the Nebraska legislature, but we failed. The opposition to the bill was led by the Nebraska Farm Bureau. You can learn more about Initiative 300 and corporate farming bans by clicking here.

We spent a lot of time fighting for the corporate farming ban in the Nebraska legislature, and we issued strong warnings on what could happen now that Nebraska's had disappeared. Unfortunately, we didn't have any really good concrete examples. Now we do. Here's what happens when you don't have a corporate farming ban:

A corporation from Delaware recently paid $52 million for part of the largest farm in Lincoln County.

It was the most money paid in a one-time land deal in Lincoln County in anyone’s memory.

The sale could mark a milestone in the way farm business is conducted in Nebraska. For nearly 25 years, from 1982-2006, the Nebraska Constitution prevented such corporations from owning any Nebraska farm or ranch land.

This is the future, people. And rural citizens and legislators who oppose corporate farming bans need to wake the hell up. There are all sorts of economic reasons for the ownership of agricultural land involved in commodity production to transition to exactly this sort of model- a big-ass corporation owns the land and pays a farm manager to run a farm on it. Maybe that's not inherently evil, but it sure as hell is not the way small towns in the Upper Midwest were built and definitely not the way small towns will survive, let alone thrive. Ownership of assets matters, and we're going to lose control of the most precious asset rural America has- land. And there's a lot of it involved in this particular transaction:

According to county records, the deal (which includes some ranchland) contained:

— 15,322 irrigated acres

— 3,690 grassland acres

— 108 dryland acres

— 53 acres of roads

— 20 acres of farm out buildings

— 7 residences of one acre each.

Now, a corporate farming ban does not prevent out-of-towners from buying up land. No sir. And it does not prevent farms from getting really big- obviously, the farm above sold as a single tract, so it was already big. There are other policy tools that can address those situations. However, the important thing here is the liability issue- who the hell knows who owns this corporation, which was apparently set up solely for the purpose of holding this land. I tried to look it up, but no luck there. The corporation, Lincoln Farm LLC, was incorporated in Delaware on Feb. 5th, and bought the land on Feb. 20th. According to the North Platte Bulletin, it is apparently investment fund money, though the paper gives no details on why they are led to believe that.

But we do know the previous owner- Don Oppliger, a New Mexico cattle feeder and mega-farmer. I don't like him owning all that land, but at least we know who it is.

Because now, if Lincoln Farm LLC totally screws the community or the environment over, there is almost no recourse. If they build 10 mega-hog buildings on the land and end up dumping millions of gallons of manure into local waterways, what do you think will happen? I'll tell you what- Nebraska Department of Environmental Quality will try and fine Lincoln Farm LLC, but if that fine is for any actual substantial amount of money, Lincoln Farm LLC will simply go bankrupt. And the people behind the money will simply walk away.

You may have noted that a most of the land involved is irrigated. Nebraska has some serious water supply issues. What do you think would happen if Lincoln Farm LLC simply pumped as much water as possible as quickly as possible? Where's the economic incentive to conserve? And again, if Lincoln Farm LLC violated laws governing irrigation, they can just walk away.

Or if commodity prices go in the tank at some point- all of Lincoln Farm LLC's suppliers will be out of luck if they decide to declare bankruptcy.

Limited liability really only means that liability is shifted- in this case to other members of the community and taxpayers. Because they're the ones who will have to pay the price if Lincoln Farms LLC screws up. When that liability is shifted within the community, that's one thing- a family farm incorporating still has people living in that community, and they will be held accountable by that community. But a bunch of investment funds? They could care less about the community. Their only concern is profit. And even if they hire a farm manager who lives in the community, his or her only concern will be profit too- if it isn't, Lincoln Farm LLC will find itself a new farm manager.

The future is now. Bad government policy and low commodity prices equal farm consolidation and concentration. Bad government policy and high commodity prices equal faster consolidation and concentration. Unless something is done, there will be more of these LLCs. I think I might be sending this North Platte Bulletin article to the members of the Nebraska legislature. And I might include a special note to all of them who voted against a corporate farming ban, because what they really did was vote for Lincoln Farm, Limited Liability Corporation.