Farmers are currently venting their anger against the federal government. Their biggest opponent has been within their own ranks for many years: investors. A story about sleepy politics, clever deals and lots and lots of money.
Tens of thousands of farmers are currently demonstrating against the federal government’s withdrawal of subsidies. They loudly show their power with blockades across the country. This is dwindling as they become fewer and fewer. Business tasks due to high costs and obsolescence are putting a significant strain on the professional group. Pressure is increasingly coming from investors.
Their presence is not new, especially in East Germany, but has increased significantly in recent years. In the wake of the 2009 financial crisis, investors were looking for safe investment opportunities. Since the European Central Bank’s low interest rate policy meant there was little prospect of interest income, a real run on farmland began. This was favored by previously changed framework conditions in EU politics.
The European Union’s Common Agricultural Policy (CAP) changed its support for farmers in 2003. In order to prevent so-called butter mountains and milk lakes, the liter of milk or the ton of wheat was no longer used as the basis for subsidies, but rather the cultivated area of a farm. So anyone who wanted to collect a lot of EU millions from now on didn’t have to produce much, but instead had to own as much arable land as possible. This is noticeable. Because, although the number of agricultural businesses in Germany continued to decline significantly, the total area cultivated remained almost constant. In other words: Since then, fewer and fewer farmers have had ever larger farm areas.
Smaller businesses are disappearing
In 2020, the average area cultivated on a farm was 63 hectares. That was 7 hectares or 12 percent more than ten years earlier. According to the Federal Statistical Office, in the same year, farms with more than 200 hectares accounted for 62 percent of Germany’s total agricultural area – although they made up just 14 percent of the farms. “Deutschlandfunk” reportsthat since 2000 only the number of farms that cover more than 200 hectares has increased. Farms with smaller arable land became steadily fewer. In most cases they were bought by investors.
There were several reasons why they initially struck in East Germany: farmland was significantly cheaper compared to West Germany. In 2019, a hectare cost an average of 16,270 euros compared to 38,396 euros in the west. Another advantage for hungry investors: the contiguous arable land was larger. This was due to the organization of agriculture via LPGs, agricultural production cooperatives, in the GDR. In addition, another change favored the entry of investors into agriculture throughout Germany. As farmer Dietmar Lucke explains in an interview with “Deutsche Welle”, buyers of farms no longer have to prove that they have technical training in order to be able to farm the area. He still had to provide this proof when he bought land in Brandenburg in 1992.
The last point in particular means that companies or corporations that originally have nothing to do with agriculture are increasingly able to buy farmland. For example, the well-known KTG-Agrar belonged to Siegfried Hofreiter. He actually earned his living with mobile homes. The KTG-Agrar – At the time, according to Capital, it was Europe’s largest agricultural group – went bankrupt in 2016, his company Flexicamper was hit in 2023. Hofreiter and his wife are in custody on charges of delaying bankruptcy and commercial fraud.
The new farmers: pharmaceuticals, insurers, heating engineers
However, behind the increasingly numerous agricultural holdings, representatives from other sectors are also appearing: for example the Gustav Zech Foundation, which belongs to the construction company Zech Group. Or the insurer MunichRe, the pharmaceutical company Merkle, Remondis founder Norbert Rethmann, Martin Viessmann, managing director of the heating specialist of the same name. But Aldi’s Lukas Foundation is also said to have secured numerous agricultural areas and businesses. None of them have much to do with agriculture, but they earn good money from it.
There are reasons for the corporations’ secrecy. The case of the agricultural company Röderland GmbH in Bönitz, Brandenburg, made headlines. He wanted so reports the MDR, a farmer buy. The process went well, but shortly before the decision was made he received a rejection. He found out that another bidder wanted to pay two million euros more than him. This was not a competing farmer, but the real estate developer Quarterback AG from Leipzig. The losing farmer particularly criticized the fact that the real estate company did not appear as a bidder from the start, but apparently only entered the race for the agricultural business shortly before the end. He speculated that the short lead time was intended to prevent authorities from intervening.
Aldi’s Lukas Foundation, in turn, is said to have used a loophole in the law to avoid having to report the purchase of 2,000 hectares of land in Zeitz, Saxony-Anhalt. So the foundation didn’t just buy the desired arable land, but the entire business. This eliminated the need for approval, which would have been necessary if simply purchasing arable land. By purchasing the entire business, it didn’t even have to be displayed. reports “Deutschlandfunk”. Of the 2,000 hectares, 800 are said to have been transferred directly to Aldi. Market value of the entire arable land: 24 million euros.
Save taxes thanks to “share deals”
Another trick allows corporations to save considerable money when purchasing land. “Share deals” is the magic word. These are still possible due to a loophole in the law. Real estate transfer tax would actually be due when purchasing land. The amount varies in the federal states, but can be as high as 6.5 percent of the purchase price. Interested parties often simply intervene with real estate companies and do not buy the land directly. You purchase shares in the company that owns the land. And there is no longer any real estate transfer tax. According to “Deutschlandfunk”, 28,500 hectares are said to have changed hands via “share deals” between 2007 and 2017 alone.
By purchasing arable land and businesses, investors have permanently changed agriculture in Germany. So far, especially in East Germany, where they already own between 19 (Mecklenburg-Western Pomerania) and 37 percent (Thuringia) of the agricultural land, as “Agrar Today” writes. But they are also increasingly trying to get ashore in West Germany.
Rental prices are exploding
One consequence of the accumulation of land is that the prices for arable land have skyrocketed to utopian heights. Many farmers complain that they currently don’t have to think about purchasing land at all. According to the Federal Statistical Office, not only have purchase prices risen extremely, Rental prices also rose by more than 60 percent between 2010 and 2020. In 2021/2022, a hectare of leased land cost an average of 378 euros.
Of course, investors also benefit from the generous subsidy payments from Brussels. After France and Spain, Germany is the third largest recipient in the EU. In the funding period 2023 to 2027, around 6 billion euros will go to agricultural businesses in Germany annually, as the Federal Information Center for Agriculture writes. In addition, there is a further 1.8 billion euros per year for climate and environmental protection measures. Of course, these sums are still divided among hundreds of thousands of companies, but for some agricultural holdings there are at least decent amounts in the millions, as “Agrar Today” has compiled. For example, Deutsche Agrar Holding (DAH), which bought parts of the insolvent KTG-Agrar, is said to have collected 5.36 million euros for its 36 companies in 2019. The Lindhorst Group came in at 3.38 million euros and Aldi’s Lukas Foundation at least 3.01 million euros. Even the energy company RWE is said to have received 330,000 euros in this context.
The environment also suffers
But investor activity has other consequences. Primarily neighboring areas are purchased in order to merge them. Ditches, hedges, bushes and streams that previously separated areas are disappearing more and more often, which is damaging the environment. But the areas are also changing. The Federal Agency for Civic Education writes that in 1960 around half of the agricultural land was still used for meadows and forests. Currently it is only 28 percent. There is also a tendency towards monocultures. Because what is grown is what produces good yields. For this reason, the cultivation of rapeseed and corn increased significantly in Germany as a result of E10 funding.
It is uncertain whether this overall development can be stopped. There have been political initiatives in recent years, but so far they have achieved nothing. At the EU level, capping the subsidies at 100,000 euros has already been considered. This, in turn, was rejected by federal politicians. The Agriculture Minister of the last grand coalition, Julia Klöckner, instead emphasized the so-called redistribution bonus, which was intended to prevent land accumulation. This stipulates that the first 46 hectares of a farm receive more funding than those beyond. There should be around 2000 euros here. The EU, on the other hand, subsidizes one hectare with 250 to 280 euros. However, farmers complain that even the 2,000 euros is far too little money in comparison.
In Thuringia, Agriculture Minister Susanna Karawanskij presented a draft law that would require land purchases to be reported. In addition, municipalities should be able to prohibit these. What will come of this remains to be seen. Similar legislative proposals failed in Saxony and Saxony-Anhalt. However, this is not due to the investors, but partly to the farmers themselves. Because they fear that they will no longer be able to sell their land to the highest bidder when they retire. And so investors can continue to buy agricultural land and businesses on a large scale, benefit from EU subsidies and build up reserves for bad times.