South Dakota Econ-Utopia: Corporate Farms Lose in the Voting Booth

By Jonathan Elsberg, CPE Staff Economist

The voters of South Dakota have recently upheld one of the least known but most progressive set of laws in the land. Along with eight other Midwestern states, South Dakota restricts corporations’ ability to own or operate farms. In the case of South Dakota, this restriction was first legislated in 1974 (Title 47, Chapter 9A) and beefed up in 1998 through an amendment to the State Constitution (Article XVII, Sections 21-24), which boldly states that “No corporation or syndicate may acquire, or otherwise obtain an interest, whether legal, beneficial, or otherwise, in any real estate used for farming in this state, or engage in farming.”

Corporate interests attempted to water-down these restrictions with their proposed Amendment A. However, Amendment A was defeated in the June primary elections, meaning that South Dakota’s restrictions on corporate farming will remain intact for the time being.

This is good news for the family farmers of South Dakota, and the rural communities to which they belong. The number of family farms in the state has held steady since 1999, while in the rest of the country family farm have been in the decline. Representatives from the Stand Firm! Coalition (which opposed Amendment A) attribute at least part of this family farm maintenance to the restrictions on corporations. The principle of defending family farming from corporations was recognized by the state’s legislature when it past the 1974 Family Farm Act, which stated that “The Legislature of the State of South Dakota recognizes the importance of the family farm to the economic and moral stability of the state, and the Legislature recognizes that the existence of the family farm is threatened by conglomerates…and is jeopardized by downward vertical integration in farming.”

This idea is not merely theoretical or anecdotal. Researchers Dr. Rick Welsh and Dr. Thomas Lyson recently analyzed Census of Agriculture and Economic Census data to see if corporate farming restrictions have beneficial effects on the states that use them. They found that, in general, states with such laws suffered lower poverty and unemployment and had more farms realizing cash gains in their agriculture-based counties. Additionally, they found that the stronger the restrictions on corporate farming, the better (in general) the outcome for the communities involved.

Unfortunately, South Dakota’s anti-corporate farming laws are not in the free and clear just yet. Recently, U.S. District Judge Charles Kornmann ruled that the existing anti-corporate amendment to the state’s Constitution does not meet the requirements of the United States Constitution’s commerce clause. This ruling is being appealed to the U.S. Circuit Court, but if upheld, it will require South Dakotans to reformulate their laws in a way that protects family farms – as they have repeatedly shown they wish to do – while passing constitutional muster.

It should be noted that Judge Kornmann did not take issue with the right of South Dakota to restrict corporate agriculture. While ruling that that the anti-corporate statutes generally serve “a legitimate [i.e., constitutional] local purpose,” his judgment did find flaw with right-of-way access for utilities and with compliance with the Federal Americans with Disabilities Act. However, South Dakota law states that if any part of a statute is found unconstitutional, the entire statute is nullified. It was into this legal limbo that pro-corporate interests injected Amendment A. If needed, the existing anti-corporate statutes can easily be modified so that they comply with Judge Kornmann’s findings and also continue to protect family farmers and their communities.

Sources and additional information:

Center for Rural Affairs, “Amendment A Fails in South Dakota,” in the July 2002 issue of the CFRA Newsletter.

For additional information on corporate farming issues, see the CFRA’s “Corporate Farming and Market Access” page: www.cfra.org/issues/corporate.htm.

Fritz Herrick, “People victorious over agribusiness in South Dakota,” Madison, Wisconsin Independent Media Center, 6 June 2002 http://madison.indymedia.org:8081/front.php3?article_id=5312.

Argus (South Dakota) Leader editorial, “Amendment A defeat a step backward for S.D.,” 5 July 2002: www.southdakotaelections.com/Story.cfm?Type=Editorials&ID=291 .

Dr. Rick Welsh and Dr. Thomas A. Lyson’s article, “Anti-Corporate Farming Laws, the ‘Goldschmidt Hypothesis’ and Rural Community Welfare,” is available from the website of Nebraska’s “Friends of the Constitution” at www.i300.org/what’s_new.htm#anti_corp.

The full text of Title 47, Chapter 9A of the South Dakota Codified Statues can be read at http://legis.state.sd.us/statutes/Index.cfm?FuseAction=DisplayStatute&FindType=Statute&txtStatute=47-9A

The full text of Article XVII, Sections 21-24 of the South Dakota Constitution can be read at http://legis.state.sd.us/statutes/Index.cfm?FuseAction=DisplayStatute&FindType=Statute&txtStatute=0N-17

The full text of the proposed and rejected Amendment A can be read at www.state.sd.us/sos/2002/2002bqprimary.htm.

If you have access to the Lexis-Nexis online database, you can read Judge Kornmann’s decision. Click “Legal Research” –> “Federal Case Law” –> enter “south dakota farm bureau” into the Keyword box and change the Court drop-list to “District Courts,” then click the “Search” button. Judge Kornmann’s ruling is the first case returned: “S.D. Farm Bureau v. Hazeltine,” filed 17 May 2002.

(c) 2002 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.