Thoughts of a farming operation typically throw up images of a solitary farmer running a tractor or a combine over farmland that they own. This couldn’t be further from the truth. Across the U.S. today, around 55% of all cropland is leased out from landowners who are, in many cases, not resident in the near vicinity of the farm. Rental payments toward these leases, which last year were $30 billion, are one of the top five expenses in a farm P&L statement. In midwestern states, like Iowa, the amount of leased land in some counties is close to 70% and has shown a 5% increase over the last five years. The reality is that farmland leasing is the foundation of much of the farming activity today. This has been the case for a few years now, but it is facing a new challenge: farmland transition.

For several generations now, farmland has been seen as a stable asset class. For some investors, this type of real estate is a way to diversify their portfolios away from the vagaries of the stock market. Farmers, on the other hand, see it as the foundation of their business. Still, other landowners might view it more sentimentally and as something of a family heirloom rather than the basis of a food-secure future.

According to the World Bank, the average farm will produce 4.1 million data points per day by 2050, a 200-fold increase from 2014. This U.S., which is leading this data revolution in agriculture, is possibly going to produce several times more than the average farm around the world. There is no question about the potential to improve profitability and productivity; however, a lot of things have to be true before this promise is realized.

According to the American Farmland Trust, between 2001 and 2016, America lost about 2,000 acres of farmland and ranchland every day. This means in that time, we lost about 10 million acres of farmland. Meanwhile, the USDA reports 943 million acres of farmland in 2001, compared to 893 million acres in 2022. Whatever the number, this is sizeable.