Investing In Organics -- a Profitable Endeavor
Categories: On The Farm
by Shelley Goldberg Story Re-published with permission by the WallStreetDaily
Ten years ago, buying organic seemed like a luxury reserved for the rich and famous – with pictures of celebrities in tabloids carrying Whole Foods bags under headlines like, “They’re just like us! They go grocery shopping!”
The times have changed, however.
With so much research on the pitfalls of non-organic and GMO (genetically modified organisms) products readily available to every consumer, organic produce and all-natural products have become more popular than ever.
Investing in Ecology
Since the year 2000, we’ve been living in the era of what’s best described as the “Biological Revolution.”
Paul McMahon, Managing Partner of SLM Partners – an asset manager of rural land – explained the evolution of organic farming, beginning with the mechanical revolution (1830-1920), into the chemical revolution (1920-2000).
McMahon points to five key principals of successful ecological farming:
- Focus on soil health
- Minimization of external inputs
- Recycling nutrients and energy
- Exploiting the benefits of diversity
- The ability to grow healthy and nutritious food
He emphasizes that ecological farming isn’t simply the domain of small farmers, and debunked the myth that it’s anti-technology. In fact, farming as a whole has become highly technical with more room for innovation and longevity than most industries.
There will always be risks involved in farming – be they conventional or organic – but there will also never be a time when humanity doesn’t require the nutrients of the natural world. Thus, it’s vital to continue the push for the advancement of farm capabilities.
More than any other risk, farms remain vulnerable to extreme weather that can cause the loss of crops, soil erosion, and other damages. (Just take a look at Munich RE’s natural catastrophe database for more evidence of this.)
Additionally, farmers have to endure higher input costs (fertilizer, fuel, seeds, etc.), unexpected degradation of natural assets (four to six tons/acre/year of topsoil loss), environmental externalities (climate change), and are subject to ever-shifting consumer trends.
Yet, the benefits to organic farming continue to outweigh the risks on multiple fronts.
As demand for organic foods increased by 50% every year, General Mills saw its net profits from GMO products plunge by 24% in Q1 2015. In an effort to keep up, the food giant is doubling its organic purchases this year.
Overall, organic farming can produce better yield while lowering operating costs. Additionally, it enhances the natural capital (restoration of degraded land), and has climatic resilience.
Plus, organic farming produces positive externalities and the chance to monetize them – like global carbon stocks sequestration. There’s three times more carbon in the soil than in the air.
There are also higher value markets that demand a massive premium (three times as much for corn) and more profitable farming – $300 versus $100 per acre than in conventional farming.
That’s a major profit!
Serving the People, the Planet, and Profits
Sustainable Farm Partners LLP (SFP) is a U.S.-based firm committed to socially responsible investing in organic farmland, and is dedicated to developing organic row crop operations.
The firm works to convert conventional U.S. farms using GMO methods to organic production.
SFP is based out of Iowa, the home state of Founder Harn Soper, who first saw the advantages of organic production when he converted his family farm in 2010.
With four generations of Iowa farming in Soper’s family tree, he’s well-versed in the nuances of successful agriculture in the state.
Iowa is known for its high-quality soil and adequate precipitation (28 to 32 inches per year). As such, Soper doesn’t depend on irrigation, which is, after all, an unsustainable source.
He began the transition to organic farming by first eliminating genetically modified corn and soybeans in favor of organic corn and oats. As a result of his successes, he launched Sustainable Farm Partners in November 2015.
The company plans to acquire an initial 12,000 acres of row crop land, and then eventually up their stake to 40,000 acres. Soper has already overseen the conversion of 640 acres of his family’s 800 acres of farmland from GM to all-natural, and the results have not only made him a believer in organic, but they’ve made him a lot of money, as well.