Leaving the family farm? North Dakota legislature forges ahead on changes to corporate farming law
- Family farmers or ranchers must own 75% of an authorized livestock farm (ALF) corporation and 51% of an ALF limited liability company;
- Officers and directors of an ALF corporation or managers and governors of an ALF LLC must be actively engaged in the operation;
- An ALF entity is limited to 160 acres of land, and no individual shareholder may hold an interest in ALF entities that own a combined total of more than 640 acres;
- ALF entities are prohibited from producing crops or grazing livestock;
- ALF entities are limited to 10 shareholders;
- Foreign entities, including subsidiaries of foreign companies, are prohibited from investing in ALF entities; and
- ALF entities are subject to the same reporting and enforcement standards as existing family farm corporations or LLCs
Neither the North Dakota Farm Bureau nor the North Dakota Farmers Union is opposing a bill that would loosen the rules that prohibit corporate ownership of farmland in North Dakota.
However the North Dakota Farm Bureau would like to see the bill do more, while the Farmers Union would like to see it do less.
The bill is a “carve out” for livestock and does not directly impact crop growers.
Existing North Dakota century code disallows corporate structures from owning land. Up to 15 members, and as distantly related as second cousins can own ag production land together, but a fundamental corporate structure is not allowed to own farm or ranch land in the state.
In its current form, HB 1371 would allow some corporate ownership in livestock operations, but only if a family farmer or rancher maintains control of the operation.
North Dakota Farmers Union president Mark Watne, a Minot area farmer, said that the new bill opens up the opportunity for LLCs and corporations to have some ownership in a farm as long as the farmer maintains control. His group is neutral on the bill.If the bill passes Family farmers or ranchers would still need to own 75 percent of an authorized livestock farm (ALF) corporation and 51 percent of an ALF limited liability company.
Additionally, the operations under this new structure would be limited to 160 acres, and no entity may hold an interest in more than 4 of these operations, for a total of 640 acres or less.
North Dakota Farm Bureau policy director Pete Hanebutt said his group would like to see all restrictions on corporate farming eliminated.
“It’s hard to imagine, that you and I, as unrelated people couldn’t be partners in a farming operation,” he said.
Hanebutt called the current law “antiquated,” saying that the state of North Dakota is not a destination for hog barns, poultry facilities or dairies because of the prohibition on corporation ownership.
“We are a cow-calf state and a grain state. That’s a shame. We virtually have no poultry, very few dairies.”
The number of dairies in the state continues to drop, from the over 100 operations in existence 10 years ago, he said.
NDFU’s Watne believes those businesses are not growing because of a lack or profitability and distance to market.
“You have to be profitable. You can’t force something you can’t make money at,” he said.
Hanebutt said that North Dakotans would like to get corporate backing in order to build hog barns and large dairy operations like those found in Minnesota, South Dakota, Iowa and further south.
“Dairies have been involved in the economy of scale. The small ones have dropped out. That’s the reality of farming. Either you specialize and stay smaller or you get bigger – that’s something that’s happened in agriculture since the ‘70s,” he said.
“We don’t have the corporate structure to allow for outside financing to come in and help if you want to expand. So dairy men get to a certain size, they can’t find the capital and can’t find a partner – maybe their kids don’t want to come home – so they choose not to expand,” he said.
Hanebutt said North Dakota’s remote location is a factor in the limited number of livestock confinement barns, but it’s not a very big factor. “When we have hogs born in South Dakota, then they go to Canada to be raised and then back to South Dakota, there is something wrong with that,” he said.
He admits that western North Dakota may not be ripe for industrialized livestock production, but the southeast part of the state, at least, probably is, he said. “We think the rising tide will float all boats,” he said, meaning his organization believes all of North Dakota agriculture will benefit from livestock confinement operations.
“Modern production agriculture is so foreign to some of our communities that they don’t understand the benefits these (concentrated livestock facilities) could bring to their communities,” he said.
“We are missing opportunities. Farmers are missing the opportunity to get a cheaper source of fertilizer,” he said.
Watne said his organization is “tired of the fight” over corporate farming. “We believe the people in North Dakota don’t want this, but we’re sensitive to farming and ranching,” Watne said. While he isn’t jumping up and down with excitement over the bill, he said “as long as farmers are in control, that makes it substantially better. It allows farmers to come together and get some outside capital, and that’s ok.”
Watne also pointed out that, without processing capabilities, livestock feeding may or may not bring more profit to the state. “If all we’re going to do is push pigs through a hog barn and think we’ll sell hogs, nobody will make much money. You have to process beyond the feeding or you have a problem,” he said. He said much of North Dakota, especially the western 2/3 is far enough from major cities, that processing may not be profitable due to expenses such as rendering, etc, that can wind up being a boon in the right geographical location. “If you’re paying to get rid of the waste, and you’re competing with a company that is able to sell it, you won’t be competitive,” he said.
The North Dakota Farmers Union helped publicize a referendum in 2016 in which over 75 percent of North Dakotan voted not to change the existing law that prohibits corporate ownership of farmland.
A Senate committee is expected to take up the issue next week or the week after.
Hanebutt said HB 1423 (an ag zoning bill), 1473 (regarding grants for county zoning ordinances) and 2373 (to allow counties to designate themselves as ‘ag friendly’) are a few more bills the North Dakota Farm Bureau supports.