Farmland LP, an organic ag-focused investment company that currently manages more than $250 million in assets and over 16,000 acres of farmland in three Western states, has been continuing to purchase land and just launched its newest fund last week.
Earlier this year, Farmland LP announced it acquired Riverwood Farm, a 1,180-acre property in Oregon’s Willamette Valley. Riverwood grows organic blueberries, wine grapes, and hazelnuts and has additional acreage available for conversion to organic production.
"As a high-quality operating farm with current cash flow and compelling value-add opportunities, Riverwood fits into our portfolio very well. Its location near our existing Oregon farm portfolio and farm-management headquarters also provides excellent economies of scale,” said Farmland LP’s CEO Craig Wichner.
Craig Wichner, CEO, Farmland LP
The largest fund manager focused on organic farmland in the US, Farmland LP owns ag properties throughout California, Oregon, and Washington. It was founded by Wichner in 2009 after the birth of his daughter led him to be increasingly concerned about the state of the environment. He realized the agricultural system was broken, so he decided to start a fund that would support organic farming for its environmental and health benefits—plus, he believed it would be a financial success.
"As a high-quality operating farm with current cash flow and compelling value-add opportunities, Riverwood fits into our portfolio very well. Its location near our existing Oregon farm portfolio and farm-management headquarters also provides excellent economies of scale.” - Craig Wichner
Most of the land Farmland LP purchases is not yet certified organic, and the company adds value by investing in the three-year conversion process, which Wichner said can be quite challenging for the average farmer. “Transitioning to organic involves changing production methods, using new techniques, and introducing new crops. The farms won’t produce net cash flow in that time, but fortunately our business model provides the capital to bridge that period.”
Farmland LP’s certified organic land currently produces more than 40 crops, including blueberries, squash, sweet corn, tomatoes, wine grapes, hazelnuts, and olives. “Our farms have been very productive and have seen strong prices for both row crops and permanent crops,” Wichner said. “The overall organic market continues to grow strongly—and lack of supply is the main constraint.”
“More than 50 top retailers and commercial brands depend on the quality products grown by us and our tenant farmers on our farms,” Wichner shared. “Many of the customers for crops grown on our farms are familiar names and include Whole Foods, Driscoll’s, Trader Joe’s, Costco, and Harry & David, among others.”
“Transitioning to organic involves changing production methods, using new techniques, and introducing new crops. The farms won’t produce net cash flow in that time, but fortunately our business model provides the capital to bridge that period.” - Craig Wichner
When asked how inflation has been affecting the performance of Farmland’s first two funds (Vital Farmland LP–Fund I and Vital Farmland REIT LLC), Wichner said, “The value of farmland is based on the value of the crops grown on that land, so as food prices increase, so do cash flow and farmland values. Some of our costs have increased but not to the same degree as conventional, chemical-intensive farms. For them, the cost of chemical fertilizer nearly doubled last year because of the run-up in natural gas. We use compost, which costs just a little more than a year ago. Overall, our funds continue to perform well. Vital Farmland LP–Fund I has since inception generated an average net after-tax return exceeding 100 percent for our original investors.”
Farmland LP organic oats
Farmland LP launched its third and newest fund—Vital Farmland III—last week, and Wichner said it's the company’s “largest fund yet and the largest capital raise ever for organic farmland conversion."
"Over the past few years, we’ve seen a significant rise in the number of wealth advisors, institutions, and individuals who want investments that align compelling financial returns with positive environmental impact," he said.
Wichner said he's a strong proponent of the USDA organic seal because it is “grounded in federal law, and it’s been time-tested. With clearly defined practices and metrics, it gives clear guidance to farmers and transparency and assurance to consumers. It’s the most trusted food and farmland standard.”
"[It's our] largest fund yet—and the largest capital raise ever for organic farmland conversion.” - Craig Wichner
Wichner shared that he’s concerned about ag industry sustainability terms that lack federal oversight and aren’t well defined.
“Terms like ‘regenerative’ and ‘sustainable’ have no established definitions, and we’re seeing some intentional confusion at best and greenwashing at worst by monocropping firms when it comes to using those terms,” he said. “The organic standard became federal law to give consumers real transparency and choice to not support monocropping, GMO crops, and synthetic fertilizers and pesticides. Today, conventional farmers are continuing to monocrop, but now they are calling themselves ‘regenerative’ when their de-generative practices created the problems with ag in the first place.”
Wichner mentioned Leading Harvest as an example of a label he believes lacks clearly defined standards. “A recent article in The Organic Insider noted that Leading Harvest does not have a policy on which processes and ingredients are prohibited,” he said. “Instead, according to the article, ‘farmers decide completely on their own as to which processes and ingredients are used.’ That’s a sharp contrast with the third-party certified organic standard.”
“Over the past few years, we’ve seen a significant rise in the number of wealth advisors, institutions, and individuals who want investments that align compelling financial returns with positive environmental impact.” - Craig Wichner
Wichner said he is a fan of the new Regenerative Organic Certified (ROC) standard because it’s grounded in the strength of the USDA organic seal and is well defined. “We’re reviewing the ROC designation to see if it would make sense for some of our farmland,” he said. “But we do also want federal oversight of the term ‘regenerative.’ Farmers who monocrop industrial corn but call themselves ‘regenerative’ are actively misleading investors and consumers.”