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On Friday, a showdown between two of the largest agricultural landowners in the United States—the Church of Latter-Day Saints and Bill Gates’ wealth management firm—came to a head when the Mormons beat out the mogul on a bid for 12,000 acres of Eastern Washington farmland that was once at the center of a $244 million “ghost cattle” fraud locals have dubbed “Cattlegate.”
The land in question lies on the mighty Columbia River, the fourth-largest river in the United States and one central to the region’s culture and economy for thousands of years: fishing, transportation, and power generation are essential uses to this day. The Columbia also provides agricultural landowners an important and dwindling asset: water rights, and for those with anxiety over the coming climate crisis, access to a seemingly infinite supply of fresh water is worth fighting for.
So when the prized acreage in Eastern Washington came available, Bill Gates, through his firm Cascade Investment (which made news for its large-scale stock transfers to Melinda French Gates as part of the couple’s high-profile divorce) jumped into the bidding fray. At stake was the right to purchase the 12,000-acre property in Benton County, which AgriNorthwest, the agriculture arm of the Mormon church, will acquire for $210 million when the deal is finalized in August.
The Gates’ and the LDS church’s interest in the property came down to the basic principle of scale, says Chris Olsen, the Northwest Region Director of Investment for Farmland Consultants, LLC, a brokerage firm that assists institutional investors in the acquisition of agricultural property across the United States. “It’s a whole lot easier to buy one huge piece than 20 separate pieces of property, not only because of the favorable water rights, which is paramount, but also because of the size of the asset, most of which is in farm and feed crops,” he says.
Olsen’s wealthy clients invest in farmland, an asset class not typically aligned with the stock market, in an effort to diversify their portfolios “in anticipation of capital markets being overbought” and other economic factors. A typical deal structure for Gates, according to Olsen, works like this: the investor will buy the land, then bring in an outside farm management company to run it. Using Gates’ investment company as an example, “they’ll designate maybe 2 to 3 percent of their asset base to agriculture,” says Olsen. “That could easily be multi-billions of dollars, not necessarily a huge percentage, but still significant in terms of the dollars involved.”
The Columbia River acreage would have added to the already 269,000 acres of farmland across 18 states that Gates, through Cascade Investment, has accumulated in the past decade, including 70,000 acres in north Louisiana, 20,000 in Nebraska, and more than 14,000 already in Washington state. Instead, the LDS will add another 12,000 acres to its already massive land holdings, which include over 600,000 acres in Florida alone—2 percent of that state’s total land mass.
The 12,000 acre assemblage in Eastern Washington currently generates revenue through large-scale farming (potatoes and onions) and cattle herding, but with an increasingly warmer climate, it’s the water rights that come with the property that may end up being its most valuable asset.
Dan Haller, a Water Resources Engineer with Aspect Consulting, a water rights consulting firm operating in the Northwest, knows full well about the value of “favorable water rights”, especially in the Columbia River Basin. According to Haller, water here is “fully appropriated”—meaning that if you want it, you can’t just apply to the Washington State Department of Ecology for a new water right; you have to buy and transfer existing rights. “Water rights operate under the same supply and demand principle that other scarce resources do; as the need for additional food production grows, it creates upward pressure on the price of water rights,” Haller says.
For its part, the Mormon church-owned AgriNorthwest’s desire to add more Columbia Basin land to the 100,000 acres it already owns in Washington and Oregon may have as much to do with economic prosperity as it does with religious faith.
The Mormon church has a unique relationship with agriculture; as Donald H. Dyal wrote in an article for Agricultural History, “The Church of Jesus Christ of Latter Day Saints has also been suffused with positive agrarian values from its inception. Man’s duty… is to strive for independence, which means, among other things, that he is to be self-sustaining; a powerful impetus for subsistence agriculture.”
That the 12,000-acre site is even available for sale, let alone via a bankruptcy auction, is something of an anomaly; it’s the victim in no small part of a familiar American sin: greed.
The property, now in the hands of trustees for creditors, previously belonged to the Easterday family, which has its roots in Eastern Washington going back to 1958, when patriarch Ervin Easterday moved his farming operation from Nampa, Idaho, to 300 acres of undeveloped land in what was then the new Columbia Basin Reclamation Irrigation project.
In 1989, grandson Cody became a partner and worked alongside his father, Gale, just as Gale had done with his own father. Together, they grew Easterday Farms into an 18,000-acre operation producing potatoes, onions, corn and wheat. Cody directed the Easterday Ranches feedlots, where grain products from the farms were used to feed cattle, while his brother Cully worked as the farm agronomist.
According to a complaint filed on Jan. 25 by Tyson Foods, Inc. (a supplier of beef and pork products), Easterday Ranches, which had entered into a contractual relationship with the supplier in 2014, defrauded Tyson out of $225 million by falsely claiming 220,000 head of cattle in its inventory that did not exist. The swindle, or “Cattlegate”as its come to be known in agriculture circles, is the largest “ghost cattle” fraud in American history, perpetuated by a loophole Cody Easterday exploited in an attempt to recoup over $200 million in losses incurred by bets he made on the commodities futures market.
On Feb. 1, Easterday Ranches filed for bankruptcy protection, followed by Easterday Farms one week later.
The Tyson lawsuit was swiftly followed by a second suit, filed in federal court by the Commodity Futures Trading Commission, or CFTC, against Cody Easterday and Easterday Ranches. Now, Easterday faces civil charges from the CFTC for allegedly providing fraudulent information to the Chicago Mercantile Exchange (CME).
The U.S. Department of Justice began a criminal investigation into the matter that resulted in a federal summons and Easterday’s guilty plea on March 31. Easterday has agreed to make restitution to Tyson and the unnamed company to the tune of $244 million. Wire fraud at this level carries a maximum sentence of 20 years in prison, but Easterday is not due to be sentenced until August of this year.
In a classic American twist of fortunes, the empire Cody’s grandfather began to assemble as an independent farmer in 1958 will now likely fall into the hands of one of America’s two largest landowners, when the results of the bankruptcy auction are set to be certified in August.
“In the final analysis, it’s a shame that Cody Easterday sullied the name of hardworking farmers everywhere with his actions,” reflects Olsen, who has worked in the industry for most of his career. “We would have liked to see ownership of that property stay in the community, but the trend nationwide is that a piece of land that big, while it could have been broken up into local ownership, because of the scale, value and dollars involved, it’s no surprise that an institutional investor is picking it up.”