An investor in sustainable ag.
That differs from conventional farmland investing, a hot alternative vehicle among institutional investors like Harvard University and TIAA-CREF.
"Midwest farmland is a bubble, and it's debt-driven," says Craig Wichner, managing partner of San Francisco-based Farmland LP, a private equity firm that converts farmland to organic. "The requirements for ethanol have driven up the cost of farmland and of food, and more land is being taken out of other productive uses and being converted to corn land.
"Food is correlated with oil, and if you are investing in farmland, you don't want that correlation," he says. "A great alternative is sustainable ag."
As an investment, sustainable ag is burgeoning. "The conversation is about scale and affordability-feeding everybody equitably," says Gray Harris, director of sustainable agriculture at Coastal Enterprises Inc., a community development finance institution, or CDFI, in Wiscasset, Maine. The National Healthy Food Finance Initiative, for example, incorporates many issues (obesity, access to healthy food, financing, etc.) and involves three different departments: Treasury, Agriculture and Health and Human Services.
The talk across the country is about building a new food distribution system comprising a network of regional food systems linked by "appropriate" trade-something the Sacramento, Calif.-based Food Commons is developing a pilot project for in Los Angeles. Investors are finding new ways to earn returns by building and enhancing soil, and various loan and equity funds offer opportunities to match investors and farmers, convert land to organic, engineer affordable land for farmers, and provide farmers with production and operating capital.
A Vulnerable Food System
According to Richard Heinberg, senior fellow at the Post Carbon Institute, agriculture accounts for 16% of the U.S. annual energy budget-more than any other industry. "We use natural gas to make fertilizer," he has said, "and oil to fuel farm machinery and power irrigation pumps, as a feedstock for pesticides and herbicides, in the maintenance of animal operations, in crop storage and drying, and for transportation of farm inputs and outputs." The net result is an industrial agriculture system astounding in its inefficiency-an average of 10 calories of fossil fuel inputs to produce one calorie of food. And he says the use of GMOs to grow crops with less water, etc., also relies heavily on fossil fuels.
"While [local food] is trendy, we may as well take advantage of that," Harris says. "But really, there's nothing trendy about this. It's about feeding ourselves."
The New Economics of Farming
This real-world approach is the underlying principle of sustainable ag.
The idea: Rather than growing acres of fuel-fed mono-crops (even "organic" mono-crops), these labor-intensive farms are diversified-and local.
There are several methods. Biodynamic farming-often called "beyond organic"-is a closed-loop system where everything on the farm stays there. Animals produce the fertilizer. There are no chemicals. And harvest cycles are attuned to the moon. Bio-intensive farming, which combines biodynamic practices with the French intensive method developed in Paris centuries ago, maximizes yields from minimal spaces while restoring the land. Permaculture yields remarkable abundance by incorporating a design method that mimics nature. Ultimately, it requires less work than traditional farming.
Because of innovations like these, there has been a cultural awakening with respect to the quality of our food and its impact on our health. This, in turn, has catalyzed an interest by investors in supporting farms and soil. Although different models are emerging, they all recognize one salient fact: Many farmers cannot afford to buy land. This article focuses on innovative ways to make farmland affordable for farmers, and future stories will cover other sustainable ag topics.