Foreigners have a hand in SD ag, despite old state law and new push to blacklist countries
Recent complaints by South Dakota politicians about foreign investments in U.S. agriculture are a case of political deja vu.
A similar mood swept over South Dakota politicians 43 years ago, when the Legislature passed a law intended to prevent large purchases of farm or ranch land by foreign interests.
Despite the existence of that state law, foreign individuals or entities own a meatpacking plant in the state and more than 350,000 acres of South Dakota farm land.
But now there's a political reaction to recent news of acquisitions elsewhere, like in North Dakota, where a Chinese company bought 300 acres of land near an Air Force base.
In response, U.S. Rep. Dusty Johnson, R-South Dakota, is co-sponsoring a bill that would prohibit people acting on behalf of China, North Korea, Iran and Russia from carrying out any merger, acquisition or takeover resulting in control of a U.S. agricultural company.
“China’s efforts to influence American agriculture threatens U.S. security — this bill is common sense,” Johnson said in a statement.
Gov. Kristi Noem recently echoed that sentiment in a tweet, saying, “My dad always told me, ‘Never sell the land, Kristi. God’s not making any more of it.’ Supporting American farmers means keeping Chinese businesses from owning our American farms.”
My dad always told me, “Never sell the land, Kristi. God’s not making any more of it.”— Kristi Noem (@KristiNoem) July 25, 2022
Supporting American farmers means keeping Chinese businesses from owning our American farms.
Yet, a Chinese firm already owns the state's largest meatpacking plant.
The Chinese company WH Foods acquired Smithfield Foods in 2013 for nearly $5 billion. Smithfield has a pork processing plant in Sioux Falls that employs nearly 4,000 workers.
Johnson's legislation isn’t retroactive, so it wouldn’t impact Smithfield. Noem has yet to propose any legislation.
The issue isn't new
What's omitted from the current political rhetoric are references to an existing South Dakota law that regulates foreign ownership of ag land. The Legislature passed a bill in 1979 that was designed to prevent some foreign individuals and governments from owning more than 160 acres of farmland.
Democrat Kent Frerichs of Wilmot sponsored the bill. Congress had recently passed a law requiring reports of foreign purchases of ag land, and those reports showed 11,201 acres in the state were under foreign ownership at the time — up by 8,302 acres in the preceding two years.
Frerichs, whose family still farms in rural Wilmot, said there was a fear in the late 1970s that foreigners would overpay for land and drive the cost up for locals. There was also a desire to keep South Dakota land in South Dakota hands.
"At the time, it seemed like there were a number of countries, including Saudi Arabia and others at that time, that looked like they had a lot of wealth that they were looking to try to invest, and they were looking at South Dakota agriculture land," Frerichs said.
The legislation encountered some pushback.
"It took a couple of years or so before we actually were able to get the bill passed because there was a fair amount of opposition from some landowners and those that thought, well, if people own property, they should be able to do whatever they want with it," Frerichs said.
The law caps individual foreign ownership of ag land in South Dakota at 160 acres with a few exceptions, including for land passed down by inheritance and for countries with treaty rights to hold land. Frerichs said those were included to prevent the law from being deemed unconstitutional.
Records revealed in 2016 by the Midwest Center for Investigative Reporting showed multiple examples of foreigners owning more than 160 acres in South Dakota.
The records say Alois and Erna Moser, of Austria, bought 320 acres in Beadle County in 1982, a few years after the state law took effect.
Jon Van Patten is an assistant attorney general for the state and previously served 38 years as a law professor at the University of South Dakota. He said the 1979 law not only has exceptions but also a loophole, because it only addresses foreign residents and governments.
"Who else besides an alien and a foreign government could own property? And the answer would be a corporation," Van Patten said.
Some of the foreign-owned ag land in South Dakota is held by corporations. A South Dakota corporation registered to three people from Germany, Dreis Charolais Ranch, owned about 11,800 acres in Ziebach County and another 640 in Corson County, according to the 2016 database.
Van Patten said if lawmakers want to address the issue of foreign ownership of ag land, they need to think like a lawyer.
"You don't just sloganize your way into a solution. There's a difference between that and many things which are effective, politically, for making a point," Van Patten said. "There's a whole world of difference in actually executing that as a sensible policy."
Frerichs is frustrated that nothing has been done to address foreign-controlled corporations.
"The state legislators and executive branch and the Attorney General's Office should have maybe had a suggestion on how to correct that flaw," Frerichs said.
Rep. Johnson's federal legislation would target foreign individuals acting on behalf of a blacklisted government and would prevent them from gaining control of U.S. agricultural companies. Johnson's staff said the Committee on Foreign Investment in the United States would review transactions.
Meanwhile, Frerichs wants better enforcement of South Dakota's existing law.
"Why isn't there an effort made to force the Attorney General's Office to start enforcing the law that we have?" he said. "And enforce it very rigidly. Don't let it get tied up in a lot of legal jargon."
According to the latest data from the U.S. Department of Agriculture, foreign residents or entities now own over 350,000 acres of ag land in South Dakota — that's about 1% of all South Dakota agricultural land, but a greater than 3,000% increase from 1979. The largest foreign owners of South Dakota farmland are from Europe.
Some of the land is in farms and ranches, but there is acreage being used for other purposes, such as energy development.
Spanish-owned Tatanka Wind Farm was the biggest foreign landowner in South Dakota as of 2016, with about 40,000 acres in McPherson County. And French-owned Power Partners Midwest LLC owned about 17,500 acres in Minnehaha County.
The Chinese-owned Sioux Falls Smithfield plant does not appear in USDA data about foreign ownership of ag land in South Dakota, apparently because it's within Sioux Falls city limits and is classified as industrial land.
In fact, there is no Chinese ownership of U.S ag land in South Dakota, according to the USDA data. But there were formerly 44 acres in South Dakota under the ownership of a person from Iran, which is one of the countries Johnson wants to blacklist with his federal legislation restricting ownership of ag companies.
The Midwest Center for Investigative Reporting learned in 2016 that an Iranian, Abdol Samad Barari, had owned 35 acres of ag land in Custer County and another 9 acres in Clay County since 1978.
But according to the Clay County deputy register of deeds, the property he owned there was sold in 2020 by his wife, Rachel Ann Barari. And according to the Custer County Equalization Office, she also sold the 35 acres in Custer County.
According to the University of South Dakota, which is in Clay County, Rachel Ann Barari worked at the university from 1989 to 1999.
SDPB News asked Rep. Johnson's staff if people like the Bararis would be targeted by his bill.
Johnson's staff said people from the blacklisted nations who are not working on behalf of that nation are unlikely to be affected by the bill. They said the Committee on Foreign Investment in the United States would monitor transactions and block purchases only if the people involved are determined to be acting on behalf of a blacklisted foreign government to gain control of a U.S. ag company.