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Investing in the future
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Investing in the future

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Farmland LP promises financial returns while converting conventional acreage to organic tilth

Jason Bradford and Craig Wichner are out to change the world, a few acres at a time.

The two men are partners in Farmland LP, a fledgling private equity fund with a unique mission: to buy up conventional agricultural property and convert it to organic food production.

Since launching the venture in 2009, they’ve purchased a little over 2,000 acres — about 950 outside Corvallis in Oregon’s Willamette Valley and 1,100 near Brentwood in California’s East Bay region.

And they’re getting some traction with investors. So far, 64 people have put money into the fund, which currently holds $12 million worth of farmland.

The attraction is simple, Bradford said: the chance to do well while doing good.

“We’re marketing the vision,” he said. “The people who are backing this, yes, they want to make some money. But they also want to grow the supply of organic farmland.”

Organic gaining ground

Only a tiny fraction of U.S. farmland — about half of 1 percent — qualifies as organic. But that number is growing, along with consumer interest in chemical-free food, pasture-raised meat and sustainable agricultural practices.

According to the latest data from the U.S. Department of Agriculture, America had 4.8 million acres of organic crop and rangeland in 2008, up from 935,000 acres in 1992. Oregon alone had nearly 157,000 acres of certified cropland as of 2010, a

report by Washington State University found.

To be sold as organic in this country, food products must meet special USDA standards. In general, chemical pesticides and synthetic fertilizers are prohibited, and an accredited agency must certify that none have been used for at least three years before farm or pasture land can be considered organic.

Farmland LP’s California ground is just beginning the three-year conversion process, with a couple of hundred acres going into organic transition and the rest to follow eventually.

Here in the mid-Willamette Valley, the process is farther along. Most of the 950 acres was already in a transitional stage when the company bought it and is expected to be certified by Oregon Tilth within a week or two.

To rebuild the natural fertility of the soil, the land has been replanted with a complex mix of forage crops and is being used to graze sheep. Once depleted soil nutrients have been replenished, it will go into a rotation of annual food crops and pasture.

In the meantime, the land is already supporting a thriving sheep business. Vitality Farms, a separate entity run by Bradford and livestock manager Mac Stewart, is leasing the Corvallis-area property from Farmland LP.

“This spring we’ll lamb about 750 ewes, then another 150 this fall,” Stewart said.

“Per capita consumption in the U.S. is pretty low, but lamb is kind of on the upswing,” he added. “It’s one of the new ‘in’ foods.”

Prices are good right now, and Vitality Farms should be able to command a premium from health-conscious foodies for certified organic meat. To make the most of that marketing advantage, the company is bringing in some new sheep-handling equipment, including a computerized ear-tagging system for tracking information on individual animals.

“It will allow us to do more precision management. It’ll allow us to say, ‘This lamb came from this farm,’” Bradford said.

“We’re really excited about that. People want to know, just like the terroir of grapes, what’s the terroir of this lamb?”

Long-term strategy

Farmland LP’s value proposition is twofold: First, the company says, agricultural property is a low-risk investment that tends to appreciate in value over time and gains even more value with organic certification. Second, the land can be managed to provide cash flow from crop or livestock production.

Like other forms of socially responsible investing, it’s a long-term strategy, Bradford said.

“It’s not the kind of thing where we buy land and wait for the price to go up and sell it. It’s buy and hold,” he said.

“What we tell investors is you may not get cash flow for three years. We expect to ramp up to good cash flow in five years.”

And while Farmland LP’s financial backers do expect to realize a return on their money, Wichner said, they’re willing to wait for it.

That’s because, like the fund’s principals, they want to help nudge American agriculture away from chemical inputs and genetically modified crops and push it in the direction of environmentally friendly food production.

“They’re all interested in seeing more organic and sustainable farmland,” Wichner said. “They might be interested in it on the investment side or they might be interested in it on the social reform side, and we accomplish both.”

And now, he argues, is a good time to be buying agricultural property — especially for people who care about how that property is managed. A big chunk of American farmers are getting on in years and getting ready to put their land up for sale.

“The corporations with a lot of money right now are the ones growing GMO crops. No one that we know (other than Farmland LP) is buying conventional farmland and converting it to organic,” Wichner said.

“You really have an unprecedentedly massive amount of farmland changing hands right now, and it’s going to set the ownership for the next 20, 30, 40 years.”

Advancing the cause

Making investment choices to foster social change was once a rare commodity in financial markets, but that’s no longer the case.

According to the Forum for Sustainable and Responsible Investment, socially responsible investing now tallies an estimated $3.07 trillion, a little over 12 percent of the $25.2 trillion U.S. marketplace.

In general, socially responsible investors steer clear of companies involved in alcohol, tobacco, firearms and other potentially harmful products.

Instead, they buy stock in businesses with good reputations for environmental stewardship, employment practices and respect for human rights.

Farmland LP is part of a small but growing subset of the socially responsible financial universe sometimes called impact investing, which seeks to have a more immediate effect by pumping money into companies that directly advance particular goals.

The approach continues to grow because it has proven to be a profitable strategy, said Tessie Petion, a vice president with Domini Social Investments, which manages several large, socially directed mutual funds.

“Over the last 20 years, we’ve seen that socially responsible investors can expect returns that are in line with what you can expect from more traditional investments,” she said.

While Farmland LP is much smaller than the companies Domini funds tend to invest in, Petion calls it “an interesting complement” to what firms like hers do.

“You need people doing those types of investments,” she said.

But can socially responsible investing really change the world? Petion believes it can.

“We’ve learned, certainly, that things don’t move quickly sometimes,” she said. “But we’ve found that working with companies, working with our shareholders, we can really push for change.”

Conact reporter Bennett Hall at 541-758-9529 or bennett.hall@gazettetimes.com.

 

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