July 20, 2021

By Michelle Pelletier Marshall, Global AgInvesting Media

Emerging from a global pandemic, it was our first in-person conference in more than a year, and by all accounts – Global AgInvesting On The Green 2021 – was a successful event. Hundreds gathered at a new venue – Sleepy Hollow Country Club, just one hour north of NYC. Despite steamy July temperatures, plenty of cold beverages and invigorated networking kept the conversation and participation at a breakneck pace, and participants walked away with substantial industry knowledge and new connections, and new investment opportunities to ponder.

More than 40 industry leading speakers covered topics from regenerative agriculture to managing water risks, to SPACs and CEAs. Demonstrating the opportunities in organic agriculture – a sector with 12.8 percent market growth in 2020, even though hampered by the constraints of supply – was Farmland LP CEO Craig Wichner.

“We are involved in changing the ag system from a chemical-focused, commodity-driven agricultural system to something that is focused on biological soil health and increasing the natural health and yield from plants and the overall economics connected to that,” said Wichner, a long-time supporter of GAI.

And Farmland LP is practiced in that experience, with more than 15,000 acres under management and over $175 million in assets in California, Oregon, and Washington. The company oversees the growth of 40 different crops, with a ratio of one-third farmed by them to two-thirds leased out.

How Do Organics Add Value to Ag?

There is much potential in organic farmland, with only 1 percent of U.S. farmland currently designated as certified organic. About 6 percent of the U.S. food budget is spent on organic food, or about $56.5 billion, which, according to the Organic Trade Association said Wichner, would be much larger if not constrained by supply.

Wichner spoke of the determining factors of the value of farmland – is it water, location, soil, climate, inflation, size, population trends? … “It is driven by the value of the crops grown on the land and the net operating income generated, so fundamentally the way to improve the value of farmland and the cash flow is to grow more valuable crops on that land,” he said.

Reiterating that a farmland investment is stable, and not correlated with debt markets (like commercial real estate), Wichner made the case that the $2.7 trillion worth of farmland in the U.S. has the same economic value as all of the apartment buildings in the country, and with 54 percent of cropland in the U.S. being leased, that farmland is commercial real estate.

“The economics of farmland have been very strong. Over the past 90 years, it has delivered 11 percent annualized returns, about half from cash flow and half from appreciation,” said Wichner, noting the substantial opportunity in organic farmland.

“Fifty-three percent of U.S. cropland grows two commodity crops: corn and soy – that’s not the best use of that land from an economic return perspective; it’s just very operationally efficient for the farmer… in switching to organic vegetables we are taking gross revenue from $1,000 per acre to $3,000-$4,000 per acre.”

Wichner said that his company estimates that there is about $80 billion worth of farmland that could be converted to organic just to serve the existing domestic market demand for organic products.

Farmland LP buys farmland and develops long-term crop rotation plans, including managing the three-year conversion to organic production. They also pay close attention to infrastructure, including irrigation, water rights, crop mix and more. By doing this, they have increased lease rents from $300 an acre for conventional crops to $700 an acre for organic production.

“From our $50 million first fund, not only did we deliver almost a 70 percent economic return to investors, but we also generated a 46 percent return to the ecosystem – carbon sequestration, clean water, healthy soil, additional pollinator habitat, etc.,” said Wichner. “In conclusion, it is possible to go organic, and it is possible to generate premium returns for investors and do good for the planet at the same time.”

About Craig Wichner

Craig Wichner, who is a managing partner at Farmland LP, co-founded the company (www.farmlandlp.com) in 2009. The firm converts conventional farmland to sustainable, certified organic farmland, seeking to generate attractive returns and a positive impact on our food system and environment. Currently, Farmland LP manages over 12,500 acres of farmland in Northern California and in Oregon’s Willamette Valley, and is a recognized leader in investing and sustainable agriculture. Wichner directs the farmland investment program, including overseeing property acquisitions, leases and sales, and the financial affairs of Farmland LP and its sponsored funds.

Wichner is a seasoned executive with over 25 years of experience building companies including Depotech, which developed and currently produces an FDA-approved treatment for metastatic brain cancer (now for Sigma-Tau Therapeutic), and Kindmark, which developed and sold automated employee charitable contribution programs for Fortune 500 Companies such as GM, EDS and Charles Schwab. He received a Bachelor of Science in Biochemistry and Molecular Biology, with a minor in Economics, from the University of California, San Diego.

– Michelle Pelletier Marshall is contributing editor and author for HighQuest Partners’ GAI News and Oilseed & Grain News, and managing editor for its WIA Today blog. Additionally, she is the company’s Senior PR/Media Manager. She can be reached at marshall@highquestpartners.com.