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Buying the Farm

June 26, 2015

Ross Wilken, twenty-three, and his father, Harold Wilken, don’t look much like starry-eyed radicals as they inspect their fields of black beans just west of Danforth, Illinois. The hot, wet afternoon sun beats down on their greasy jeans and tired eyes like it does on any other farmer. But their twenty-three hundred acres of organic crops, surrounded by millions of acres of genetically modified corn and soybeans, are nothing short of an insurgency.

“These look really good,” says Ross, examining plants heavy with purplish pods. “I wish I had more acres in these.”

The black beans in this eighty-acre patch, just one of the Wilkens’ many nonadjacent fields scattered around the area, will fetch eighty cents per pound when sold in Munger, Michigan, and afterward might end up in your Chipotle burrito. That’s a tall premium compared to conventional beans, which fetch about fifty cents. The Wilkens get similarly good prices for their organic wheat, corn, pumpkins, soybeans, and alfalfa hay. So it’s no surprise this family enterprise is steadily expanding its operation in every way possible—building barns and grain bins, buying heavy equipment, experimenting with software, and taking in a son-in-law, a nephew, and a neighbor down the road as partners.

The challenge is finding the land. Like most farmers in Central Illinois, the Wilkens lease the majority of the land they farm. Now they need to buy or lease new fields to take through the three-year transition to organic. And they need to get there before Wall Street does.

New players with deep pockets have appeared in farm country—investors looking to buy up prime farmland and turn a profit on the steady upward trend of land prices and farm incomes. There have always been family offices and private investors who owned farms, but the scale has changed: in the last decade, huge pension funds, university endowments, banks, sovereign wealth funds, hedge funds, and new exchange-traded companies have sunk an estimated $25 billion into U.S. farmland.

That only represents about 1 percent of the $2.4 trillion in farmland in this country. But some activists already see a battle looming for the control of our nation’s food production, pitting multigenerational farmers with a long-term vision of sustainability against the short-term needs of large, conventional investment funds.

The stakes are very real. According to the Oakland Institute, a policy think tank specializing in social, economic, and environmental issues, the profits-first emphasis of these megascale investments can lead to the worst kind of absentee landlordism, resulting in badly managed farms, poor labor practices, disempowerment of farmers, and increased speculation in land prices. Investors could even choose to frack the land, or sell it to a golf course developer, if that’s more profitable than leasing to a local farmer.

This investment phenomenon shows no sign of slowing. Farmland has become a hot new asset class, and investment advisors say they’re getting loads of requests. Reports estimate there are investors with at least $10 billion looking for deals.

“These investors are looking for an asset class that gives them some real protection; in other words, a ‘real’ asset as opposed to a paper asset,” says Philippe de Lapérouse, managing director for agriculture consulting firm HighQuest Partners, which has helped drive this international phenomenon with its popular Global AgInvesting conference series. Farms are a tangible asset, but also produce dividends in the form of crops—like gold with yield.

And it’s an international phenomenon: a study by the International Land Coalition found that between 2000 and 2011, large investors bought or leased more than 500 million acres—an area eight times the size of Britain—in Africa, Asia, and South America. But de Lapérouse says there’s still plenty available, adding, “The investable universe for farmland for institutional investors is probably at about $1 trillion.” Which leads to serious questions about what investors intend to do with this land.

“As an organic farmer, we’re not interested in an investor who’s just in it for the dollar,” Harold Wilken says. “If they are, they’re not in it like us; we’re not in this for the dollar. So we don’t want to work with people who are only in it for that either.”

He’s not talking about profit; the Wilkens, father and son, are making money. He’s talking about time and the condition of the soil, environmental impacts, and the quality of the food he provides to human beings. Harold needs an investor that will put him on land he’ll never have to leave, and not force him to “mine” it—his term—for the sake of predictable profits.

When he first started to expand his organic operation about a decade ago, there was no source of money available with that kind of patience—so he had to help invent one. In 2007, he became the first farmer to team up with a new triple-bottom-line investment company called Iroquois Valley Farms.


“WHEN YOU ASK one of our third- or fourth-generation farmers—How long do they want to be on that land?—they’re looking to stay on it for life,” says Iroquois Valley Farms (IVF) CEO David Miller from his office in the Chicago suburb of Wilmette, Illinois. “They’re looking for their kids to be on that land. The capital’s got to think the same way.”

A former banker, Miller talks about Iroquois Valley Farms as a radical alternative to institutional investors—a radically profitable alternative, he is quick to point out, as his company is making “over a double-digit return on an annual basis, since the inception.” That would put it on par with the institutional funds, which are averaging, according to de Lapérouse, somewhere from 7 to 12 percent annual returns. But Miller’s approach is based on long-term capital and not on “trading capital.”

Iroquois Valley Farms, which is a certified B Corporation—a corporate structure that obligates businesses to be accountable for creating positive social and environmental impacts—does a lot of what other investors are doing in this same space: with money from high-wealth, accredited investors it buys and holds farmland, leases it to farmers, and shares in the profits in good crop years. The difference, however, is that IVF prefers the sustainability and high crop prices of organic farms, and will weather the sometimes-lower yields and the three years required to transition a piece of ground from conventional to organic production. They will also sell a property to the tenant farmer after seven years. Or, if the farmer’s not ready to buy, will just keep on leasing it to him or her indefinitely. Allegedly, for generations.

That sort of talk, Miller says, makes his attorneys nervous. It’s not the exit favored by Wall Street, which always reserves the option to cut and run, usually at ten-year intervals. “But common-sense economics dictates that you want the farmer to have an option to buy the land that you’re leasing to him,” Miller explains. “If you don’t, it’s not sustainable agriculture. And it’s just bad business.”

There aren’t many farmland companies with similar missions today, but there are a few, including Grasslands LLC, a ranch- purchasing fund set up by holistic grazing advocate Allan Savory; and Farmland LP, a six-year-old San Francisco–based company named as one of the “Best for the World” among B Corps and one of the “World’s 50 Most Innovative Companies” by Fast Company.

“We’re demonstrating that sustainable agriculture is more profitable than chemical-dependent agriculture,” says Farmland LP CEO Craig Wichner, whose company has already closed one $50 million fund and is now offering a $250 million real estate investment trust, or REIT, buying property in California and Oregon, also for accredited investors. “We have a great business: we buy farmland, we improve how it is managed, and we improve the cash flow. But, from an environmental standpoint, from a future standpoint, we really want to have a world that works. We want people to have healthy food on the table. We want people to live in environments where they shouldn’t be afraid to live downstream from a farm—because we all do, one way or another.”


SUSTAINABLE, ORGANIC, and regenerative agriculture investment is still a small slice of the $25 billion pie in the U.S., says Renee Cheung, an independent consultant who works with companies trying to find these opportunities. That’s because, frankly, the returns aren’t yet proven.

“I don’t think that I have really come across too many sustainable farm systems where you see the returns stack up just as well as conventional ones,” Cheung says. Farmland LP and IVF are notable exceptions, but, she adds, “The organic model doesn’t necessarily match the investment profile that most traditional investors look for.”

Investors, Cheung notes, usually want to own, but not operate. They want returns in year one, not in three or four years. They want deep, established markets, and they’ll trade or ganics’ higher prices for the giant yields of big row-crop operations. Quantity over quality, basically.

Cheung points out that sustainable farming, however, is more resilient and may turn out to be the big winner in the long run. Conventional farming relies on crop subsidies, cheap oil, and draining aquifers without restraint, among other delicate conditions. When those conditions change, sustainable operations will be positioned to grow where conventional methods may fail.

Both Wichner and Miller agree with Cheung about resiliency, but they also point out that they are offering “very competitive” returns right now, even during conventional farming’s best years. “We know that it works now,” Wichner says of his system. “We’ve increased revenues per acre by 54 percent per year.” That means other ecologically minded investment firms can’t be far behind.

“When I did my due diligence, and I looked around at some of the larger companies that were doing this, I was really dismayed at the fact that they were monocropping,” says Alexandra Dest, whose investment firm in Western Massachusetts is launching a regenerative agricultural fund that will rehab conventional farmland in the Northeast and take it “beyond organic” to permaculture, biodynamics, and other systems. “I was dismayed at the way they were acquiring their land. I don’t want to be in soy and corn. I want to be in something that feeds people.”

Every one of these stories begins with a conversion experience. The idea for Iroquois Valley Farms began in 2005, when Miller bought some land from his uncle’s estate in Iroquois County, Illinois, just outside of Danforth. When he decided to take that land organic, he started talking to a cousin, who was leasing some land to Harold Wilken. Wilken had been a conventional farmer for decades, but after a bout with cancer that he attributes directly to “chemicalized farming,” and the death of his daughter in a car accident, he went organic. He showed Miller a 142-acre farm in the area that he wanted to transition, and Miller got ten friends to ante up, buy the property, and lease it to Wilken. The LLC was born.

Today, with over $20 million in assets, IVF owns more than 3,330 acres in Illinois, Indiana, Michigan, New York, Kentucky, Maine, and West Virginia—tiny compared to the massive expenditures of institutional investors, some of whom don’t bother with land purchases of less than $50 million. By contrast, IVF invests mostly via word of mouth; organic farmers bring the company parcels that are available to buy. “We now have more people coming to us with these opportunities than probably we can realistically fund,” Miller says.

That’s because he’s just as careful about taking money as he is about finding land and farmers. Any investor jumping in with IVF has to be ready for the long ride. You can’t even vote your shares for seven years. You can sell your shares, but you can’t expect the company to sell land to cover losses. It’s not the get-out-quick scenario that most investors prefer. “We’re trying to get to the point where we say, ‘Never sell the land. Unless the farmer wants to buy,’” Miller explains.


THE OVERWHELMING MAJORITY of investors trolling for grandpa’s farm isn’t looking for sustainability. And that, says Anuradha Mittal, executive director of the Oakland Institute, is a very big problem. “These firms are driven to get into agriculture in order to get high returns. High returns as fast as possible,” she says. “We believe agriculture is all about sustaining livelihoods, increasing production, food security, stewardship of the land—all of that is displaced.”

Mittal’s not talking about Farmland LP or Iroquois; if they’re B Corps, they’re part of the solution, as far as she’s concerned (she herself sits on the board of Ben & Jerry’s, a B Corp). She’s talking about the giants driving global agricultural investment, such as: UBS AgriVest, a division of the biggest bank in Switzerland, which owns more than half a billion dollars of farmland in the U.S. alone; Hancock Agricultural Investment Group (HAIG), a subsidiary of the biggest insurance company in Canada, which has $2.2 billion in global farmland; or the Teacher Insurance and Annuity Association—College Retirement Equities Fund, better known as TIAA-CREF, one of the world’s largest pension funds, which has $3 billion in agriculture worldwide.

After the global food crisis of 2008, land acquisition in the developing world jumped 200 percent as huge firms snapped up farmland in a kind of frenzy, with little regard to local farmers already working the land. This led the United Nations to release rules for “Responsible Agricultural Investment” in October 2014, but those have been criticized by food security activists as simply validating what they call “land grabs” that prevent local people from feeding themselves.

According to reports published by the Transnational Institute and other groups monitoring international agri-investment, these companies, and the international trade agreements that support them, are structured to insulate the investor from actual responsibility for the farm, its management, and its products. This is also true inside the U.S. In one publicized case, farm workers on three of HAIG’s farms in Washington State sued—and won—in federal court over abusive work conditions. In court it was revealed that, using Texas public pension fund money, HAIG had contracted the farm work to a company, which subcontracted it to another company, which broke the law. Hancock claimed it wasn’t responsible. Everyone added fees all down the line and took profits, but no one wanted to be the actual “farmer.”

Mittal claims that this low level of engagement is typical of the field. “We’re talking about retirement funds, university endowment funds—they know nothing about agriculture, they know nothing about agri-quality or what foods feed communities,” she says. “What they’re looking at is the speculative values, and of course the investment gurus who say that it is better than gold.”

Wichner, who was in real estate long before launching Farmland LP, points out that a lot of these problems are not related to a new buyer coming into the space, but are problems simply attributable to conventional agriculture—using loads of herbicides, pesticides, and fertilizer to mine the land for maximum profits. Even small farmers can be bad farmers, he explains. “You can’t blame it all on the institutional investors,” he says. “But there’s clearly a better way of doing business.”

Both Wichner and Miller say their companies hope to sell stock in a public offering, maybe in as little as three to five years in the case of Farmland LP. Wichner sees the public offering as the ultimate triumph of a sustainable system. “That way, anyone can invest in farmland and help convert more of it to sustainably managed farmland,” he says. “And that, to us, is really the way to turn farmland back into a commons. Back into a common good.”


TRUE TO THE COMPANY PROMISE, in late 2013 Iroquois Valley Farms sold 62 acres of one of its Danforth farms to young Ross Wilken, and also bought an additional 156 acres to lease to him to transition to organic. The land includes a 2-acre homestead high up on a scenic hillside where Ross intends to build a house one day. Just twenty-three, and already a partner in a successful and expanding farming enterprise, Ross’s future is bright.

Ross wouldn’t have had this opportunity, he says, if the family hadn’t made good money in organics and gone into business with Iroquois Valley Farms. He might have been able to help his dad, but he wouldn’t have been able to own his land and make his own living.

Out on the open market, where Danforth-area dirt is going for $9,000 an acre and up, Wilken would have probably been greatly outbid by the many giant conventional farmers next door hungry for more turf, or a large conventional investor buying Illinois farms. IVF’s Young Farmer Land Access program, however, gave him nice terms. Wilken secured half of the financing for the 62 acres using a USDA Farm Service Agency loan, and got the rest from the local farmers bank.

Meanwhile, his father has the opportunity to watch his farm and farming practices pass on to another generation.

“I am a spiritual person,” says Harold Wilken, walking to the big new barn on his home farm, which is named Janie’s Farm after his daughter who died. “We’re not out here to get rich; we’re out here to make a living and to make a difference. We want to do what works for everybody. It seems like the goal of every farmer around here is to eliminate somebody. I want more farmers than there were when I came in. And I see with the organics that we can do it.”