Farmland LP: Investing In Sustainable Farmland (2016 Update)

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Over the past few years, we've tracked the success of Farmland LP, a family of funds created to increase the economic yield of farmland through sustainable farming practices.

Their approach is notable in a number of ways. It seeks to improves the quality of the underlying land. To avoid use of fossil inputs. To increase the yield per acre. To enable the production of vegetables, grains, and meats on acreage that before was monocrop. To employ more farmers per farm. To be more profitable than conventional farming. To improve the food resiliency of the local community. To reduce its dependency on liquid fuel transport by serving local markets. To generate annual returns for its shareholders, plus appreciation on their share of the underlying farmland.

The team believes there is an arbitrage in value that can be unlocked by reversing the damage modern farming has done to the land. For a detailed write up of how exactly they're pursuing this, read my first-hand account while visiting their largest farming parcel in California.

And for those of you who are visually-minded, here's a selection of photos taken this year from across the funds' properties:

Chris recently mentioned our renewed commitment here on the site to focus more on highlighting examples of better models for the future. So in that spirit, in this week's podcast, I check in with the founders of Farmland LP for an update on how the team has progressed on its mission in 2016. For the first time, we have Craig Wichner ("the numbers guy") joined by Jason Bradford ("the farming guy"), who provides much more detail than we've had in the past into the sustainable land-management practices Farmland LP employs to put the land to its best use.

Those who would like to learn more about Farmland's operations and/or its investment funds can send a request for more information here. Note that their REIT is available to accredited investors only and that Peak Prosperity has an existing business relationship with Farmland LP (full details will be provided when opening an account with the Fund or at any time upon request.)

IMPORTANT NOTE: This is NOT personal financial advice. The above information is shared for education purposes only.

As always, we recommend working with a professional financial adviser to build an investment plan customized to your own needs and objectives. 

Suffice it to say, any investment ideas sparked by this report should be reviewed with your financial adviser before taking any action. Am we being excessively repetitive here in order to drive this point home? Good...

Click the play button below to listen to my interview with Craig and Jason at Farmland LP (60m:54s).

This is a companion discussion topic for the original entry at https://peakprosperity.com/farmland-lp-investing-in-sustainable-farmland-2016-update/

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A word of apology on the audio quality of this podcast. It was a 3-way call recorded over a spotty hotel room wi-fi connection while Chris and I were traveling on the road last week – not an ideal set of recording conditions.
But we thought the quality of content outweighed the audio challenges. Hope you do, too :slight_smile:

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I have been wondering how these guys were doing.  Looking forward to the day a public fund is available. I will certainly be an investor albeit a small one. Good interview Adam.

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Thank you Adam, Craig and Jason for introducing me to Farmland LP!
So many wonderful topics in the podcast, my main takeaway was diversity matters, A LOT.

I do have a few questions and additional comments:

Very early on in the podcast it seemed as though Craig suggested that farmland values are ever increasing. Ture, land has been one of the best performing assets (if not the best) over the last two decades but I can’t agree with prices continuing to go up forever. I am not coming at this from a west coast perspective however; I am coming at it from the heart of the eastern corn belt AKA flyover America. I have made the argument on PP before that land is currently overvalued. Or if you prefer, underutilized to support prices.

Last year was painful for many traditional row crop farmers with many closing 2015 in the red. Soybeans are saving many balance sheets this year as corn has been and continues to be below the cost of production for the majority. Expect to see a record number of bean acres planted in the US next year.

Around the 5 minute mark the conversation turned to land ownership, where do you get the figures for 40% of land is leased and 1% is owned by institutions? Just curious.

At the 7:30 minute mark Craig, I believe, discusses how land ownership should benefit from past FED money printing. I would contend it already has. I say this because shouldn’t farmland value raise when interest rates fall, similar to real-estate but definitely not 100% correlated. Raising interest rates on the other hand sure does squeeze a guy operating on credit (which most do). Continuing on to the view that row crop farmers focus on maximizing short-term yields, I could not agree more. Furthermore, the cost of inputs (anhydrous ammonia, nitrogen, lime, hybrid seed) to assure this maximization are going up/steady, not going down. So, how can the value of land continue to rise when borrowing costs are increasing, input costs are flat/increasing, productivity is flat/increasing and the price of the crop is falling? This is the current environment in which an American row crop farmer is operating and has been for 2-3 years.

In this environment I would imagine an institution such as Farmland LP will continue to thrive because you are taking a long, much more diversified approach as opposed to a short, narrow one. Overall though I can’t see how land prices (in the Midwest) can sustain 10-15K an acre without a severe devaluation of the dollar… and I would also throw out there, in a high inflation environment there will be other hard assets that perform better than land (for the small land investor such as myself).

Thanks again for the conversation and education!

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Love the idea of this fund and yes, I will also be an investor as there is no way I can own farmland myself.  It is for the greater good of all of us. I only grow a few things in the back garden now!  So  would be a great addition when they launch their public Fund.  

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Love the idea of this fund and yes, I will also be an investor as there is no way I can own farmland myself.  It is for the greater good of all of us. I only grow a few things in the back garden now!  So  would be a great addition when they launch their public Fund.  

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Love the idea of this fund and yes, I will also be an investor as there is no way I can own farmland myself.  It is for the greater good of all of us. I only grow a few things in the back garden now!  So  would be a great addition when they launch their public Fund.  

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Count me in when it goes public. I’ve now finally looked up the qualifications for an accredited investor. :-p

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It certainly sounds like the right thing to do when it comes to large tracts of industrially farmed land that could use the TLC and the food produced from it will be more nutritious and, hopefully, pesticide-free, (though I don’t imagine that will be a requirement for someone to buy the land :).
One concern I have is how far this would go with respect to smaller farms (family farms of 100-200 acres or less). For over a decade I worked to start and build an education center for beginning organic farmers that was established on a county-owned farm (which has now been permanently preserved!). I know, first hand, the difficulty these farmers have affording land. They put a lot of time and sweat equity into rebuilding the soil and adding value. I fear that if smaller tracts of land that are the most accessible to these farmers are bought, brought up to organic certification quickly, and resold at a much higher price, these farmers will have an even more difficult, if not impossible, time acquiring land.
These farmers are friends and neighbors, the “stuff” of community and our last defense in knowing where our food comes from and how it is raised/grown. I would hate to see an initiative such as this have the unintended consequences of putting further hardship on these small scale farmers and, in turn, on all of us who need them more than we might know.