Craig Wichner
Managing Partner
Farmland LP
Watch the full interview with Farmland LP Managing Partner Craig Wichner here.
By Gerelyn Terzo and Sarah Day Levesque
U.S. farmland as an asset class has become more attractive among institutional investors, including private equity, hedge funds and pensions, not to mention venture capital. There is approximately $10 billion in institutional capital earmarked for opportunities in U.S. farmland, according to a 2014 report by The Oakland Institute. Organic agriculture, whose farming practices involve preserving the environment and ditching synthetic materials, represents a slice of that market, the demand for which is only rising.
San Francisco-based Farmland LP is one of the institutional investors focused on acquiring and managing organic farmland, overseeing more than 13,500 acres of farmland. Managing Partner Craig Wichner took some time to speak with GAI News at this year’s Global AgInvesting conference in New York.
While Farmland LP is focused on sustainable, organic acres, it may seem surprising the majority of the farmland the firm acquires is conventional acreage. Farmland LP then converts that conventional acreage into organic, sustainable farmland for its investment fund.
“We…own farmland as a real asset and then add value to that farmland by converting it to more complex and more sustainable crop rotations,” Wichner said. Farmland LP’s focus on organics reflects a growing trend.
U.S. organic sales of food and non-food items climbed higher by 11.3 percent last year to more than $39 billion, according to the Organic Trade Association, and the industry is expected to continue growing at a double-digit pace. Produce remains the best-selling category and comprised approximately 36 percent of total organic sales. Nonetheless, organic ingredients are in tight supply, as only about 1 percent of U.S. cropland was certified organic as of 2011, according to the U.S. Department of Agriculture.
Wichner said the best way to manage land is to perform complex crop rotations on the land, involving dedicating part of the land to a high-quality animal phase with cattle, sheep and poultry, for instance, and rotating in organic vegetables and organic grains. “That’s basically what we enable to happen,” he said.
This approach differs from traditional commodity farming, which may rely on a single crop and require pricey inputs, including fertilizers and pesticides, for instance, costs for which have soared some 300 percent in the past couple of decades, he said. “The chemical and seed companies are actually making more money than the farmers,” noted Wichner.
Farmland LP’s focuses on enhancing soil biology, which according to Wichner makes all the difference, as this leads to greater fertility, which begets higher biological productivity, which translates to better economics. “It just so happens that it’s very easy to get our land certified organic when you focus on biological productivity in the system,” he said, adding that demand for organic sustainably produced locally grown food far exceeds supply.
Watch the full interview with Farmland LP Managing Partner Craig Wichner here.