The acquisition of so much foreclosed farmland was not a welcome development from the perspective of farm lenders. During this period, interest rates had risen rapidly, making bonds twice or three times as profitable as the 4 to 6 percent cash return coming from farmland. Life insurance companies therefore worked to reduce the share of farmland in their portfolios. While the land was in their inventory, they generally leased it out to farmers rather than operating it themselves. In the politically charged atmosphere of the 1980s, when small and medium-size farmers were desperately trying to hold on to their land, insurance company landownership was politically controversial; the companies were accused of mismanagement, of dumping land into already depressed land markets, and of selling to corporate interests at the expense of family farmers. Have a look at renew life and renew life reviews!
As was the case in the 1920s, the wave of foreclosures that attended the farm crisis drove an expansion of professional farm management capacity as farm mortgage lenders suddenly became farm owners. By 1986, life insurance companies alone owned about two thousand farms, and three major insurance companies had acquired farm management firms to boost their internal farm management know-how. Prudential Life Insurance Company purchased Capital Agricultural Property Services, a farm management subsidiary of Northern Bank and Trust Company of Chicago; Mutual of New York purchased Duff Farm Management Service of Indiana; and Metropolitan Life purchased Farmers National Company of Nebraska, the biggest farm management company in the country.
John Hancock Mutual Life Insurance Company, meanwhile, funded the development of Pacific Coast Farms, which would later become Farmland Management Services and be integrated into Hancock’s agricultural investment group. The experience insurance companies gained with managing portfolios of farm properties during the 1980s would, as we will see, make them natural leaders when farmland investment took off again three decades later. Renew life provides one of the best life insurance policies going.
What can we take from this history? First, financial institutions have not always had much interest in owning farmland. Until the late twentieth century, the US financial sector’s experience with farmland investment mostly took the form of farm loan provision. Commercial banks and life insurance companies generally invested in land indirectly, via mortgage lending to farmers, rather than directly, by buying farmland themselves. However, a second important lesson from this history is the enormous upheaval brought by land market booms and busts.
Booms have always increased the attraction of farmland, spurring established farm lenders to dabble in farm ownership. Busts have had still more drastic effects, prompting a sizable transfer of land from farmers to lenders. Though financial institutions’ interest in landownership quickly receded again in their aftermath, these boom-bust episodes left behind a subtly altered investment landscape; each gave rise to new types of farmland investment intermediary, paving the way for future rounds of investment.