Publications

- July 1, 2020: Vol. 7, Number 7

Cash crops: How investors can play a role in regenerative agriculture

by The Impact Report podcast

Across the planet, our food system has become focused on producing quantity over quality, which is the way humans have been farming since the Green Revolution. The problem: This system of farming has depleted more than 30 percent of our planet’s topsoil. But agriculture does not need to be exclusively an extraction process because there are regenerative agriculture practices that replenish the health of our soils.

With that in mind, The Impact Report, which tells business stories about innovations in sustainability, produced a recent podcast featuring Don Wiviott discussing the evolution of agriculture and how regenerative soil health practices can play a key role in sustainable farming and land management. Wiviott is director of Tomorrow’s Farms, an organization that works with investors to acquire Midwestern farmland and identify financial strategies for sustainable farming, the use of organics, regenerative soil transition and measuring carbon capture. In partnership with Vilicus Capital, the business works with over 200 farmers on 80,000-plus acres.

Asked how regenerative agriculture could be rewarding for investors, Wiviott told The Impact Report: “If you owned a building, and I told you that during the next 50 years a third of the building would go away, how would you feel about that investment? That’s essentially what landowners have bought into. You have to look at the value of the underlying investment. When you own farmland, you own the value to grow plants and grow nutrition. So, I would look at it first and foremost from an investment perspective. The vast majority of land farmed in America is owned by third-party landowners. In the case of a typical farmer in Iowa, about 60 percent of land they farm is owned by somebody else. That landowner typically gives the farmer a year-to-year contract, plus the bank may only look at things one crop cycle to the next. What happens is the financial models drive a year-to-year perspective, but biodynamics and sound agronomic practices should at a minimum be in five- to seven-year cycles — even better would be 10-year cycles.

“So, there’s a current penalty, which means it could be an opportunity in the world of finance to create access structures similar to other industries where you have a loan where farmers are given something for two to three years. It looks like what you might see in a construction loan. The same approach should be taken toward the land for shareholders and banks. There’s an opportunity for the world of finance to have it line up with what makes sense on a five-, seven- and 10-year horizon instead of year to year.”

 

Excerpted from an The Impact Report podcast featuring Don Wiviott, director of Tomorrow’s Farms, being interviewed by Bard College MBA student Lucien Harlow-Dion. Listen to the podcast at this link: https://bit.ly/30pN6lD

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