Financing organic farmers: opportunity intertwined with a challenge

  • DONNA HOLMES

    DONNA HOLMES

  • Prairie Fruits Farm, Champaign

    Prairie Fruits Farm, Champaign

  • Rock Creek Farm, Peotone

    Rock Creek Farm, Peotone

 
By Donna Holmes
Iroquois Valley Farmland REIT
Updated 7/13/2021 1:10 PM

When President Biden released his plan to protect and grow the rural economy earlier this year, he called for investing in programs that would help farmers reduce their environmental impact while increasing their productivity, profitability and ability to sequester carbon from the atmosphere.

The goals that Biden's plan highlights -- carbon sequestration through planting cover crops, increasing farm productivity and resilience, and reducing emissions -- are core tenets of regenerative agriculture, a more natural way of farming that we at Iroquois Valley Farmland REIT, a nationally recognized Certified B Corp, are well familiar with. After all, Iroquois Valley and its hundreds of mission-minded investors have been helping small farmers increase their organic and regenerative land holdings for nearly 15 years.

 

Farming is a volatile industry. Food prices and weather patterns fluctuate. Financing options are equally unpredictable. But our experience shows that organic farming is more predictable, more productive and more profitable than conventional agriculture methods. Studies by our partners at the Rodale Institute and the Organic Farming Research Foundation, and others have found it's better for our health, our soil and the planet.

Yet despite the continual, rapid growth of the $60 billion U.S. organic market, organic land makes up less than 1% of our farmland. In Illinois it's even less: about 39,000 acres out of 27 million. To Iroquois Valley, our investors and our farmers, these figures represent a problem but also an opportunity.

For most of Iroquois Valley's existence, investment opportunities were limited to accredited investors who were willing to make long-term commitments of capital, and to share risk with our farmers. We amassed a roster of hundreds of financial advisers, institutions and individuals financing dozens of farmers across the country. Yet we realized this exclusivity limited our impact.

In 2019 we opened our portfolio to nonaccredited retail investors. There was a long-standing reason for this: We wanted regular people to also be able to support a healthy farm economy, from the soil to the food to the farmers. We knew there were investors out there who didn't want to play the stock market and who sought a real connection to what their money supported, in this case, ownership of high-quality American organic farmland.

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But we also recognized the business case: protection from market forces, flexibility for long-term investors, more stability in our portfolio and more muscle to increase our holdings and grow organic farmland across the United States.

We correctly predicted the appetite for such an offering. In 2020 despite the disruptions from the pandemic and its economic fallout, Iroquois Valley saw record levels of new investment. More than 130 new investors -- nearly half of them nonaccredited retail investors -- committed more than $14 million. Not only that, but our land holdings grew by 10% and our stock price grew to $618, steadily growing from $260 in 2008, proving that the value of organic farmland continues to grow.

Would our number of shareholders have grown in 2020 had we not expanded our offering? Perhaps. But because we saw the powerful value of bringing retail investors into the fold, Iroquois Valley -- and its investors -- were able to make a much greater impact in this vital quest to grow organic land in the United States.

The mission -- and opportunity -- is even greater as the effects of climate change become more apparent.

As David Miller, Iroquois Valley's co-founder and CEO, often says: "There's no liquidity on a dead planet."

• Donna Holmes is vice president, investor relations, at Evanston-based Iroquois Valley Farmland REIT. Learn more at www.iroquoisvalley.com.

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