In order to understand how we arrived at today’s food system and the opportunity to expand into organics, some history is in order.
Prior to World War II, the food economy in the US was typified by organic market gardens and small grocery stores that carried fewer than 500 items. Self-sufficiency was a necessity as the economic grip of the Great Depression remained. The food supply was local and the average farm size was 157 acres.
World War II changed everything, laying the foundation for today’s industrial food economy. With the need to feed millions of soldiers, packaged food production went into high gear. K-rations, a soldier’s staple, was the precursor to post WWII packaged foods. We went from K-rations to TV dinners.
And the manufacture of ammonium nitrate used in making bombs was redirected into making the synthetic fertilizers widely used today throughout our chemical-based system of agriculture.
Shelf with today’s food production and global distribution infrastructure in place, the average grocery store now carries over 42,000 items and the average size of an Iowa farm is 441 acres.
In 1971, President Richard Nixon appointed Earl Butz as Secretary of Agriculture with the explicit goal to lower the cost of food. With government support, his solution was to industrialize American farms, calling farmers to either “Get big or get out”.
But bigger farms meant fewer family farms. Their loss contributed to the decline of rural economies, causing businesses to close and beginning the ghettoization of rural America.
Then, in 1995, genetically modified (GM) corn was introduced. Through genetic modification, the herbicide, Bacillus Thuringiensis (BT) was inserted into every cell of a corn plant enabling the plant to kill the pests that fed on it. This was followed by more GM traits that made the plant resistant to the herbicide Glyphosate, marketed under the name Roundup. Glyphosate would kill weeds but not the desired GM treated plant. Glyphosate is now the predominant weed killer used by the world’s agriculture.
Today there are four major crop categories that are genetically modified to resist glyphosate: corn, soybeans, canola, and cotton. Glyphosate is also used by many wheat farmers to kill their wheat crop early before harvest.
In 1990 Congress passed the Organic Foods Production Act that legally defined what constituted organic farming practices. In 2000 the USDA promulgated regulations establishing the National Organic Program. When followed, a food could display the USDA Certified Organic seal.
Organic sales have grown from $1 billion in 1990 to over $40 billion today.
The debate is raging about the safety of Glyphosate (Roundup) and GM foods in general. Research has been mounting about how GM crops and associated farming practices have sickened our soil and contributed to climate change. A new understanding is emerging about how poor soil health impacts both our health and our wealth.
Organic farming is the only farming practice regulated by law, prohibiting the use of synthetic herbicides, pesticides, fertilizers and genetically modified seeds. Organic farming succeeds by working with nature to restore healthy soil and re-establish the symbiotic relationship between plants, soil, water, and sunlight. To put the organic seal on a crop, a farmer is held to the strict letter of the law and re-certified annually.
Organic food is now mainstreaming with ever-increasing demand from key demographic segments lead by both moms and millennials. Using 2014 US data, America imported eight times the quantity of organics that it exported (mainly grains). US demand for organic products far exceeds the supply, creating a clear opportunity to invest in organic farming.
Sustainable living is key to our future. The three covenants of Sustainability must benefit People, our Planet and be Profitable:
People – The double-digit growth in demand for organic food is driven by consumer interest in healthier and more nutritious food. To quote Hypocrites, the Hippocratic oath every doctor takes, “Let food be thy medicine and medicine be thy food”. Growing healthy organic food supports human health in many ways.
Planet – At a time when there is a need to be proactive in reversing climate change it is understood that human behavior does have an impact … both ways. Agriculture and climate change are interrelated processes. Farming is a direct contributor to climate change and is directly impacted by the adverse weather it produces. Organic farming practices promote carbon capture in soil. Research conducted by SFP board advisor, David Johnson (PhD soil biologist at UNM), while working on a Sandia Lab’s Mars Curiosity rover’s carbon-measuring equipment, reported “The rate of biomass production we are currently observing in this system has the capability to capture enough CO2 emissions on less than 11 percent of world cropland.” As reported in Kristin Ohlson’s book “The Soil Will Save Us,” this means that if only 11 percent of the world’s cropland improved its community of soil organisms as much as Johnson did in his organic test plots, the amount of carbon sequestered in the soil would offset all our current emissions of carbon dioxide.
Profit – Profitability is the third covenant to sustainability. If a process takes more than it gives in return it isn’t sustainable. The difference in the profitability of conventional GM farming versus organic farming is clear. For example, in 2014 when my family’s farms last grew organic corn, we received $12/bushel compared to the Iowa average for conventional GM corn at $3.50/bushel; and our yields were comparable to Iowa’s conventional corn yields. In 2015, our organic oats sold for $7/bushel versus conventional oats selling for $2.85, while our crop broke yield records.
Laying the Foundation for Sustainable Farm Partners
Beginning in 2010 in NW Iowa, my family farms began the transition of our first farm from conventional GM corn & soybeans to organic corn & oats. The financial impact was dramatic. This chart summarizes the results over an eight-year period before, during and after as we transitioned. Our net operating income averaged an increase of 290%.
At the same time, our input costs fell by as much as 40% without the need for expensive patented seed or synthetic inputs.
The overall asset appreciation of our farmland outperformed the Dow Jones Industrial Average (DJIA). From 1994 to 2014 the DJIA grew 464% from 3,834 to 17,823. Iowa farmland value grew 586% from an average $1,356/acre to $7,943/acre.
Sustainable Farm Partners, LLP Invests in Iowa Farmland – Our focus is on large-scale production of organic grains. Our organic farming model has been developed over the past decade from experience on our own farms. And our organic farm teams are geographically spread out across Iowa where there is the best farmland available.
Where We Farm Matters – Our farmland focus is where the best soil can be found and where there is adequate precipitation for farming (28” to 32”) per year. Irrigation is generally not a sustainable water source and its use should be minimized. This precipitation map from NOAA clarifies the best locations for North American agriculture.
How We Farm Matters – Our organic crop rotation achieves multiple benefits in mitigating weeds, better nutrient management, and natural pest control. No-till planting and residue left in place from the previous harvest returns nutrients and covers soil to mitigate erosion.
What We Farm Matters – Our focus on organic grains goes hand-in-hand with crop rotation. We plant corn then alternate with a hay crop of oats, alfalfa, and clover. These crops command high market prices and support each other’s nutrient needs.
The innovation in organic farming is in applying the power of nature.
Our Organic Production Team – Our relationship with our organic farm team is critical, working together on a crop share basis. Our operators, farming across the state of Iowa, provide the labor, equipment, and fuel and we provide the ground and share in expenses. Everyone has skin in the game and is aligned for success.
Exit – Our ten-year horizon on the investment forecasts double-digit returns. Unique to our program, we offer right of first refusal to our organic operators to purchase the farms at market prices. This builds a knowledgeable buyer into the exit while enabling our farm partners to increase their farm equity.
Easements – Sustainable Farm Partners is also pursuing a program to put each farm into a “Regenerative Farming Easement.” Unique to our efforts, this easement is structured in parallel with organic standards but not tied to organic standards that may change over time. Through some USDA Agricultural programs, it is possible to receive direct payments for these easements. There is also an opportunity to receive tax credits for our investors. SFP is breaking new ground in pursuing our Regenerative Farming Easement program and we will provide updates as we move forward.