 All right, good afternoon If any of you feel compelled to move forward since it's kind of a sparse audience here We might as well do that. So if you want to I'd come on come on. Let's be family Thank you. The the the other thing that's dangerous is that I Teach at at Kellogg in Stanford. So I I feel very very comfortable cold calling on the audience So we're gonna probably do a little bit of that Anyway, my name is Dave Chen. I'm with equilibrium capital group. We are a a Global asset management platform of sustainability driven real assets. So we have agricultural portfolios green real estate portfolios, etc etc and It's been it's my pleasure today to and we're having a good time up here because it's three friends and and Let me introduce the folks Kelly James Craig witchner and Brooke Randall and what we have today is the privilege of Drilling into the issue of agriculture as an investment category sustainable agriculture and why would agriculture be part of an impact portfolio and Hopefully we'll also pick at some very sensitive social and environmental issues with regard to agriculture and And what we're very very I think privileged to have today Is Kelly represents one of the most innovative I think startups in this area Which is actually collecting and creating a trading platform for the organics and other crop types in the fair trade Etc. So this would be I think of this as by bringing the Chicago Merc to the organic field And we'll have Kelly talk a little bit about that. But the other thing that I think Kelly has is truly one of the few Platforms that gives you visibility on both the supply side and the demand side of what's happening in the organic industry Whether it's from the dairies all the way through the grains. All right So tremendous visibility and and and as we were joking why do you always have to be so data-driven? So and then Brooke and Craig represent asset managers, so they're actually investing portfolios and dollars in Sustainable agriculture and so we've got an investor We've got trends that are happening out literally in the dirt and then we've got a global view of what's actually happening in the Supply demand side with that I'm going to ask each of them to introduce themselves tell you a little about the company And then we're going to dive into some questions All right. Well, thank you wonderful crowd. It's really great to be here Let me just tell you just a little bit about my background I spent five years at a company called the Chicago Climate Exchange and this was a startup to let people trade cash market for greenhouse gases, so Carbon should say cash and futures market carbon sulfur knocks. We had a clean energy index And the theory behind this was to put a price on what had previously been an externality that is carbon emissions So you give it a price you let people trade it you let people manage risk You give them they there's a financial benefit if they reduce the amount of pollution and there's a financial cost if they Don't so it becomes something that's no longer invisible. It's on someone's balance sheets and Mercaris is I like to call it a second cousin of that because it's still about pricing and asset or externalities that were either unpriced or very opaque so the idea is that a certain identity preserved commodities that have environmental performance attributes like organic like non GMO like certified palm oil If they're opaque there are transaction costs there And we should be able to bring transparency to that market by providing price data and at the same time We should let people physically trade those commodities as well And again very liquid exchanges throw off a ton of data that then goes out into the marketplace gives people price signals Let's them manage risk So that is what Mercaris is and I'll leave you with the thought before I pass the mic on that you know that Delta between a bushel of organic corn and a bushel of conventional corn is what we as a society are saying we are willing to pay for You know pick a benefit reduced pesticide use increased biodiversity better farm worker health, etc. Etc. So that's what that difference in price really means So I look forward to the discussion and you know, we'll hopefully get some good back-and-forth going Good afternoon everyone Brooke Randall and at ACM We grow food and I emphasize the term food instead of agriculture I think it brings a slightly different perspective and lens on on what it is that we do We are really driven by the need to produce more sustainably grown and nutritious food So if you look at organic as a category or subcategory within that You know organics about 5% of our total food supply. We believe that number should be higher organic premiums we believe are Too high in the marketplace today, and so we're really driven by the need to scale up this industry Currently we farm about 3,300 acres across California and Oregon We're focused primarily on permanent crops so crops that grow on a tree a bush or a vine So things like citrus berries table grapes nuts And we also are Vertically integrated so we not only invest in the land But we also are active in the packing of that produce as well as the marketing of it and we believe that's the best way to produce a Sustainably grown product is to be active throughout the entire value chain We actually operate our farms ourselves. We do not lease them out to other farmers and while we think of ourselves as a Company and we act like a company as Dave mentioned We are also a fund manager as you could probably tell by our very creative name And despite that fact We as an investment firm believe in a few key aspects of what it means for us to be an investment firm One is we believe strongly in benefit principles So we've actually incorporated benefit company principles into our investment management legal documents with our investors So we've actually written into our own articles that we need to incorporate The impact that we have on our suppliers our customers the communities in which we work We also believe that it's very important to be active not only within the impact investing community that you're seeing here But also it's important for us to go out and help to bring what we would think of as more traditional investors Into these activities, so we're very proud to be investing on behalf of university endowments and State pension funds which is the last point I would note that we also believe it's very important for us to try to provide the opportunity to invest in Activities that are aligned with people's values and that we can provide that not only to institutions But effectively to the retail investor by investing on behalf of again state employee pension funds So that's a bit about who we are Hello, can you hear me great? My name is Craig Wishner with farmland LP We buy conventional farmland and convert it to organic sustainable farmland as an investment fund We have about 7,000 acres about 6,000 acres or 50 miles east of San Francisco And another thousand acres up in Corvallis, Oregon And we're just launching a new fund a two hundred and fifty million dollar REIT which Will basically take us to the next phase, but basically what we do is Whereas ACM focuses on permanent crops. We focus on row crop land 53% of us farmland. There's 2.4 trillion dollars worth of farmland in the US and 53% of it is used to grow two commodity crops corn and soy And that may be Operationally efficient for farmers to grow the same crop year after year after year But it's actually the worst way to manage the asset of farmland itself So we're really farmland asset managers We buy great row crop land usually with great water rights and then plant pasture on two-thirds of it and bring back Good successful sustainable agriculture rotations. So we plant this very high quality pasture on it Bring in great cattle producers great sheep producers great pastured poultry producers and that generates wonderful economics For them and for us as the landowner For three to seven years after three years to get certified organic somewhere between three and seven years We've maximized that soil fertility Then we bring in organic vegetable farmers on 10 to 20 percent of the land They generate great economics on that land and we lower their input costs because of all the soil fertility that that livestock phase is added Then we rotate in grain farmers for a couple years and then put it back in a pasture So the farmers are always there. They're just rotating around a very reasonable area We get much better biological productivity because we're using healthy agricultural systems on the soil Better that better biological productivity results in better economics for both the farmers and for the investors as well So we've actually already proven our first Kind of full rotation there. We have 783 acres already certified organic The first parts of that have already gone through a three-year pasture phase and this year in organic butternut squash Which will be a very good economic crop for us at the end of the year And the whole thing is working very well We've actually been increasing the revenues generated per acre by 50 percent per year since we got started. So it's going quite well and That's far mind LP. Great. Thank you So how many of let's do a little just a little survey of the audience here So how many of you represent investors or investment advisors a show of hands, please? Great, how many of you are entrepreneurs that are potentially building products for the agricultural industry? great, and how many of you represent not-for-profits in the agricultural area and Lastly, how many of you represent either regulators or government officials of one form or another agencies etc? That's a surprise. That's a surprise. All right. And so how many of you currently are invested in agriculture in one way or another? And how many of you interested in doing that? Terrific. Thank you. Hey, so I'm Kelly when we think about the word organic and sustainable agriculture Oftentimes we think of I think a couple things one is the small stakeholder farmer in Guatemala or Kenya Or we're thinking about a one acre two acre ten acre CSA kind of a thing And so why would those why would a market that's like that? Be interested in a trading platform let alone price discovery let alone futures contracts And so paint us a little picture of what the reality is today of the organic and sustainable agricultural marketplace Sure, well, it's definitely you know, probably not news to anyone here that now I mean Agricultural is a global market and so it doesn't matter how small your holding is you are subject to forces that are beyond your control Beyond your your neighborhood or your region? And so these types of tools having this type of data having these types of tools is actually very helpful To the small holder when we first started I said, you know, I do want to provide data to the big companies And in fact Whole Foods was one of our first customers But you know Whole Foods has got a lot of capacity. They've got a lot of horsepower on staff You know, it's the small family farm with you know Ten people that doesn't have the type of access to information that that the big fortune 500 or fortune 1,000 Has so that's you know sort of the value in that and then connecting of course to broader markets So the idea that you can very efficiently Sell to a wider range of customers. I will say there's some controversy when we first started We were looking at actually doing a futures market now futures for organiser not the right reason for not the right tool at This point for a whole lot of reasons a lot of them have to do with the size of the market and liquidity However, there was a barrier a lot of we had a lot of farmers say I'm a little bit nervous about doing some markets And I call it the sort of nameless faceless hedge fund trader problem The idea that you're giving over your livelihood or control of your livelihood to some some guy at a desk in London Or New York who's you know manipulating markets And so that is a real fear when you talk about markets with with small holders Let me let me just continue on this path for a little bit So so and I think this is a really important thing, which is that we're actually watching I think the the volume of this market Increasing dramatically and so you know, I'm hoping maybe you can share an example of One of your other clients of the trading platform and data, which is one of the large organic Dairy products companies and and as they start to cross over into you know Multi-hundreds of millions of dollars of their cooperative product How does alfalfa pricing fit into this and why are they? Why is this industry now actually of a scale? That's very actually I think in some ways out of sync with what we mentally think about it as Yeah, I mean organic is big business now was 35 billion dollars in sales in the US last year alone worldwide It's something like a 60 billion dollar market and gone are the days You know 10 years ago five years ago even when you could say all right you know you pick up the phone look for some organic corn and Someone you find it somewhere and then you put down the phone and you have like two weeks to think about it And then maybe you call up and buy it or maybe you don't now it's moving, you know quickly And so we have a dairy company that you know The price of feed is one of the biggest variables in the margin on on milk or other other dairy products And so keeping a very close eye on what organic feed prices are doing is Critical to the business and you could sort of take that analogy or that example and you know apply it across a wide variety You know every fortune 500 now has an organic food line So if you're operating in the dark and don't know about you know, what's what's what's coming down the pike You know, you have no idea what forward prices are for you know organic soybeans. You're at a disadvantage So let me let me turn to you to and and so is there an economic basis for Sustainable farming and organic or is this just a sort of a save-the-planet kind of thing and Are they at odds with each other? No, I think absolutely not in fact we tell our investors that we believe That sustainability is going to significantly enhance our financial returns I think as most of you will be familiar There's a significant distinction between the two because we've got at least in the US a federal organic certification standard that allows you to actually sell Certified organic food at the store as compared to sustainable food Which broadly speaking across across the food industry has no widely acknowledged Sustainability certification there are subcategories of certain areas that have Particular certifications that folks are selling under in the meat space for example, but there really is no widely held Sustainability certification and yes from an organic perspective. I know this is true for for Craig It's definitely true for us that from an economic perspective We not only benefit from those premiums that are being paid on organic today, but more importantly for us We've actually been able to figure out how to actually improve and sometimes enhance yields on the crops with which we're involved in excess of Conventional crops kind of contrary to to popular belief and so the economic benefits for us on selling organic produce is Phenomenal, you know in today's market broadly speaking. It's 20 to 30 percent higher from a returns perspective than we see on conventional produce so the We actually look at kind of three main price premiums What we're basically doing is adding value to commodity agriculture So we look at the certified organic price premium the sustainably produced price premium grass-fed beef pasture-raised eggs and then the locally grown price premium and that in fact the locally grown probably has the Most pull for example if you offer someone a Organic peach from Chile or a locally grown conventional peach They'll actually take the locally grown one twice as often twice as much as the conventionally one and so the these price premiums Only some of them actually convert back to truly sustainable agriculture practices and that's what we focus on We actually look at the price premiums that we get from those as a great Revenue Benefit for us and we look at the state sustainable agriculture practices is actually reducing our input costs more effect more efficiently and more effectively Utilizing the resources utilizing the land and the two together Result in a much more profitable business. Not all businesses are the same You kind of have to know what you're buying and and and why you're doing it But in combination they're very very powerful but I do think that the awareness of Even if you get in by organic, but you're buying factory farmed essentially organic It's still worthwhile because it does shift behavior. It gets people out of the mindset that all food is the same And it gets people really kind of more connected at least a little bit to the land and that's that's can be transformational No, I just want to add one more thing You know both of what Craig and I were just speaking of is primarily on the sales on the revenue side of things what the Pricing looks like for those crops. I just want to note that sustainability in agriculture is really just farming 101 Right, we're always looking at how are we managing and reducing inputs while still optimizing yields So we look at that both from an environmental perspective as far as lessening our environmental impact, whether that's water fertilizer, etc But also that has a consequential economic impact, right, which is how are we reducing costs for the farms that we're managing? one of the things that we have been reading about is the It's a funny thing. I mean, you know agriculture has been obviously a main industry since our humankind and and yet over the last ten years or so it's become a a pretty Top of mind investor topic and we keep reading about the amount of money that keeps coming into this sector And I'm wondering if you guys can talk a little bit about Is there reality in that and is there, you know, what kind of money is coming into this? Marketplace and and maybe touch a little bit on what are some of the downsides if in fact there's a lot of money coming into this So to put it in perspective, there's 2.4 trillion dollars worth of farmland in the u.s That compares it's about the same size actually as the value of all the office buildings commercial office buildings in the u.s It's the same size as all the apartment buildings in the u.s All the shopping malls in the u.s And actually if you add up all of the forms of commercial real estate Which is around over 15 trillion dollars plus farmland you're on 18 trillion dollars or so And the value of all the u.s publicly traded companies is around 18 and a half trillion dollars, so really And you have almost no awareness of real assets let alone farmland And in fact that's expressed in the percentages, which is out of the 2.4 trillion worth of farmland in the u.s Only about 25 billion 1% is actually owned by institutional investors. Okay 40 percent of u.s farmland is leased But it's often done by the descendants of the people who who have this farmland So you are seeing a lot of capital flow into the space the estimate that I've seen is around 10 billion dollars worth of capital flowing into the space and that's on the surface a lot of capital, but You know the average age of farmer is 58 years old today They're dying there they're passing the land on the people who already got their farmland are passing that on About 1 to 4 percent of farmland is changing hands each year So what that means over the next 10 years you're talking about 250 billion to 1 trillion dollars worth of farmland trade changing hands in 10 years So 10 billion dollars is really a drop in the bucket the question is who's going to be buying that farmland? What kind of agricultural practices are they going to use on that farmland and my concern is that it's all going to go to Chemical dependent commodity farmers and the organic sustainable side is going to be basically left in the lurch. So or Still a small and insignificant part of it for the next 10 to 20 years So my goal really is to actually educate people because there is a lot of capital flowing in a lot of it's not going to intelligent places I'll just so Farmland partners incorporated just went public fairly recently and if you read their prospectus and you're a sophisticated investor your eyes rolled back in your head and And then if you look at their farmland purchases that they just made with their IPO proceeds Which is just due north of the Oklahoma dust bowl Spot and they're just doing sale leaseback financing sale of these back purchases for commodity cropland adding zero value To this it's some of these things are just kind of disasters. It's like a slow-motion train wreck and So really what what I hope we're all doing is actually educating people about the different forms of agriculture There's different forms of office buildings different forms of real estate all over. There's different types of farmland There's different kinds of managers the more educated people are My hope is that the capital will go to the right place It is a space that deserves a lot of capital good managers really do add a lot of value both economically and sustainably To it, but the investors have to be educated. I think I would just add and I agree with much of of what Craig said There is a massive transition happening and in American farming that as Craig said if you put all that together over the next 20 to 30 years you're talking about 70% of US farmland changing hands There is going to be a massive transition and when you look at it the challenge the one challenge in particular that larger Institutional investors are having moving into the space today is finding farm managers and really I would emphasize farm operators Folks who can actually operate farms at the scale that is required So the average size of a farm in the US today is 400 acres right with the transition that we're talking about you need Farmers who can operate on the scale of thousands of acres and tens of thousands of acres now You have that in places in the Midwest today in the row cop industry But as Craig said those are not folks who are necessarily executing on the types of practices that I think we all want to be supporting So we've got a significant challenge as a country as a society to try to help improve the professionalization of Farm managers in this country to be able to work at the scale that's coming to us over the next 20 years So we're gonna see a tremendous amount of supply of farmlands change hands. We're seeing equally on the capital side Plenty of capital coming in if not more What are we seeing from your perspective in terms of? Corporations and and other investors interests in in this well I would just add that in terms and in in addition to the the asset of farmland itself There's a lot of running room for on the technology and data side So last year you saw climate Corp sell the Monsanto for just under a billion dollars and that is you know precision data and precision ag There's I don't know how many startups I've heard of in the last year and a half to two years that are providing essentially enterprise enterprise software at the farm level So for whether you're investor and an entrepreneur There's a lot of you know ag has got a lot of space and I agree that there's room for more capital to come in without creating You know things like bubbles. I do think you know Dave and I were talking about this earlier There's a there's a lack of people who can connect the dots So you see folks that know a lot about what's going on in the farm side But they're not necessarily connected to what consumers are asking about or you see a lot of innovative Consumer-facing products, you know new brands and that sort of thing with not an idea of how ag operates in real time So those types of I do see a need for for more of those types of connectors and then finally I think there's a role for good old-fashioned project finance and in some ways ag isn't different from any other sector from water from You know from other heavy infrastructure. There's aging infrastructure Some of the new now that we've got consumer demand for things like identity preserved, you know traits Even if it's not organic even if it's something like a high oil type of corn or and you've got it There's not there's no facilities. There are not enough facilities to handle that type of these types of specialized needs that are coming That you're seeing more and more in the ag supply chain. So I Would put that out there That answers your question, but Capital oh capital. Yeah, maybe I'll just say we just are my fingers across We're raising around so these my business is actually not very is fairly capital efficient. We raised a small seed rounds 750,000 and now we're getting ready to close an a round so And our interest came from and we did go to some of the traditional VCs We ended up getting a lot of interest from family funds family funds are very heavy in the ag space So I would say you know family funds there are some traditional VCs that get it But they're you know, they're harder to find a lot of VCs used to invest in oh Land or biotech or and so finding something that that's these VCs that are that are nimble and can take advantage of new Opportunities is is I think more are needed All right, so so there's an underlying theme here and it's it's again a little bit of a controversial theme and that is scaling consolidation aggregation and and this flies in the face of Called the romance that we have about farming and that is the red barn mom and dad and the family and and I'd love I'd love your perspective on Is this just basically a huge path right now to? Consolidation and big you know sort of hundred thousand acre Industrialized farming or how do you think how do you guys think because look you guys are both raising large blocks of capital? 250 in your next REIT structure You're managing institutional capital from pension plans And and there's a demand for those investors to continue to be able to deploy large blocks of capital So how do you guys see in your strategy? the role of small and Big or is it small versus big? Take your time. This is a tough one so This is a really important conversation obviously in the agricultural community But I think even more so the framing that I think about it is and that you know health of rural communities across America I in my mind That's what we're really talking about again when you look at agriculture as an industry This is really the last major Sector of the economy that has yet to really experience the impact of our Essentially in kind of global capitalist markets right you know, where else can you find again? You know very small Oftentimes family-run producers who are providing the vast majority of the activity in the economy You know the we used to have a thousand automobile makers now we have how many? Five, you know that it is going to happen in this industry but I also to to To craigs point earlier again remember less than 1% of US farmland is institutionally owned today And I think that when you look at the inefficiency of this industry You've got to balance out from a food justice perspective from an equity perspective that the inefficiency of this industry The brunt of that is born on the poor of this country if you look at it from a food access perspective That's the impact of the inefficiency of this industry So I think we've got to balance out how this industry is going to become more efficient And I do believe that it will become more efficient with larger professionally managed farms but we've got to be able to balance that out with retaining opportunities for Small family operations again typically in rural communities for us There's a couple of things we can do there one is we Provide more opportunities for packing and processing on farm at farm in rural communities So it's one of the economic development opportunities that we're able to provide for folks We are also able to provide some of our services food safety services Marketing services to smaller farmers that they typically otherwise would not be able to afford or undertake themselves So we're able to provide them with a connection into that organic marketplace that they're not able to get otherwise And we also just simply acknowledge that this is a significant challenge again for the US You know, I participate in a CSA myself at home because I believe that we've got to do that to continue to support rural communities But it's a significant challenge You know, I actually think it goes back to US agricultural policy in 1971 Secretary of Agriculture at Roll Bucks saying Get big or get out farm fence post to fence post Grow all you can and we'll provide you with price supports and insurance and and it's and these are family farmers, right? Who? who Are on 53% of US cropland growing corn and soy in unsustainable methods So if I really try to look at the data and what does the data tell me data tells me that the current Agricultural system is really a freight train just kind of going one direction the land ownership issue to me is actually less important the The and I think actually there's a way to optimize it and fix the problem The current structure of the romantic idea that we have is basically one farmer owns one piece of land and The laws of economics say he needs to specialize they need to specialize on one kind of crop Well, that's the worst way to manage farmland. That's not how it was managed for thousands of years So when we look at farmland, we look at it at the same way as you look at our commercial office building corporations since the 1960s when REITs were created they Corporations were selling off their land their buildings to REITs basically and these REIT managers were able to actually make very efficient use of this real estate find the best Tenthouse penthouse tenant find the best retail tenants in the bottom and the best businesses in between to be tenants And when I as a business owner wanted to grow my business, I didn't have to buy a new office building I just got more space Well today the organic farmers if they want to double the size of their business because there's tremendous customer demand They have to buy a whole new piece of farmland Go into great debt spend three years converting that land to certified organic farmland And then that fourth year all everything that they grow they have to sell it all just to hopefully kind of keep up And by that time hopefully their business is growing It's a very inefficient system And so what we actually use our fund is to buy the farmland convert it to organic and let those farmers who are already They already own their own land They already have some land but they have lots more customer demand and so they can expand into our land Just like they would into an office building if they were to grow and we make sure that the land is managed sustainably So you know it doesn't it's not a story about who owns the land or who doesn't and we actually hope to have the re Go public so that really everybody is now owners of this land They're really reconnected with it and more land can be converted to these methods It's not so much who owns it, but it really is about what kind of agricultural practices are they using on the land? We view our farmland as a platform for entrepreneurialism for those family farmers actually to get back on the land Build up to this scale that's required by today's Customers and by today's economic systems and be and be very thriving and successful without that worry about going bankrupt or Losing their land or anything like that. So in our Rent systems are designed to be in line with theirs either revenue sharing or profit sharing. So it's a much more nuanced conversation But it's a very important one to have that maybe the old economic system that we had was kind of part of the problem to some extent And we have to be willing to put everything on the table For something as important as sustainable food production so I think that The work that Brooke and Craig are doing is so important because you know what what organic and sustainable ag Always gets slammed for is well, can you feed the world and can you do it cheaply? I mean our system is really good at turning out cheap, you know corn We're great at it. We're fishing at it. It's brilliant except it's been you know ruining things at the you know Soil in terms of in terms of soil and water and you know someone say human health as well So So organic you know the idea is you know can organic feed the world and can it do it at a play of not just Environmentally sustainably but at a price that people can afford now I have members of my family can that can afford to pay eight dollars a gallon for organic grass-fed milk And I have members of my family who are on food stamps and they need you know cheap milk so The idea that can you bridge that gap and can you do things like increasing yield you know organic? I don't think it's had a fair shot yet It's like the saying you know ginger Rogers did everything except backwards and in high heels You know organic doesn't hasn't had the subsidies it hasn't had you know You've still got a whole organic grain, you know 500 miles to find a place that'll process it And so I think the it's the question is to be determined whether this the scale can happen and happen in a way that can Significantly shift the system and I think it's I would encourage everyone here to think big because the only way to counter those arguments is just to do it and this Conversation here is the is the way that happens so We actually have proof that Grass-fed beef is actually more profitable than corn fed beef about ten years ago It actually crossed over that line where actually feeding growing all this corn and feeding it to livestock stock in a feedlot That actually became more expensive than actually just having a pasture on cropland and Producing the same amount of meat per acre as you did if you put all those inputs into the ground and plowed it and harvested and shipped it off to a feedlot so There are a lot of myths actually that we have in our head and actually this feed the world thing is Literally a Monsanto talking point. It is crop life international funded by Monsanto lobbying so that We could do more corn production. Oh, and by the way the corn goes into our fuel tanks So it's absolutely not about feeding the world anyone who says feed the world Really truly doesn't know what they're talking about It's a lobbying talking point that they're parroting and you really got a look underneath it You can actually produce more food per acre more profitably using sustainable agriculture practices We believe it does need to be done at scale in order to really be effective so You know one of the things that that you know, I've been most fascinated by is is the increasing sophistication in the use of data in farming and You know, I'm reminded of a recent visit that I took out to one of the largest dairies in the United States and In the fact that they have 35,000 dairy cattle and a and a and a breeding stock of another 40,000 And because they have the genetic and the health history They implemented health records before Obamacare for their cows they've come to the conclusion that They only have about 1% of their of their Heard that is chronically ill and they euthanize those which allows them to take the other 35,000 cows off of antibiotics and And that's because they now have the health records and the data and they can tell when a cow is just sick versus chronically ill and And so so this has had profound impact on well, you know now they're now they're not putting any Biotics and it wasn't an organic issue. It was just wow that there's no reason to do this and they find this kind of and you're finding You know drone usage you're finding Water especially now in California water monitoring water management etc etc And I'm wondering from a human resource standpoint and a training standpoint What's the farmer of the next ten years look like and? Maybe this is a little bit of a jaded question, but and where are you gonna find them and Is it a different individual than what it has traditionally come out of our ag schools? Well, I can tell you for us the folks that we're hiring out of school are Folks who have much more of a you know systems thinking perspective. So we're hiring engineers Biologists, you know folks from the sciences as much as we are hiring folks from the ag schools And that's exactly for that reason that you mentioned that you know we were interviewing a Potential you know senior level farm manager Somebody who'd been in farming for 30 years, you know knows farming knows agronomy Extremely well But I say this in all seriousness I don't think he had turned on a computer in 10 or 15 years and the reality of what you mentioned today is you know How we work on farm today, whether it's developing nutrition programs whether it's you know soil moisture monitoring technology You know all of our farm managers today all have iPads right they all live out of their trucks They've got a remote office in their truck. They've got access to the vast majority of the data that they need remotely and It's it's those are the folks that we're hiring and the ag schools are starting to change in their education around that But again, we've got just as many engineers and scientists as we do folks coming out of the the ag program Because we need that kind of thinking and with the level of technology that we're using today. I Think it's exciting because what it what it really does say is that there's Because of this transition, I think that's taking place in farming. We have a tremendous opportunity for the young And and quote-unquote the professionalization And sophistication of the field the other thing and this is just a straw poll. I always ask this question when I'm at large farms is You know, where are they getting these students and they're getting these students exactly you said from very Alternative programs non-traditional ag programs and there's also an interesting Gender issue there are now far more some of the most I think the most innovative Practices that are taking place are driven by oftentimes by women farmers women professionals that are entering this field So even there I think we've got some a tremendous much shake-up that's starting to take place in this in this in this area Yeah, my business partner manages Two large 150 and 200 acre center pivots from his iPhone so turns it on stops it We have water sensors in the ground so it's incredibly labor efficient nowadays I think the intellectual level is and scientific knowledge is really quite high the average farmer in the US has between four million and Eight million dollars worth of farmland and equipment Today, so these are mostly the commodity farmers that's kind of the minimum barrier to entry to get into this business and So the real question for me is you have really brilliant passionate people coming out of college But I don't know how many of them have both the Education and knowledge level and the four and a half to eight million dollars to plunk down and get started so I actually think this is a kind of You know launch to the moon Problem that we have in the United States is how do we get that next generation of farmers? Who are much more systems minded and sustainability minded back onto the land into some of these into some of these businesses? Let's open it up for questions out there Do we have microphones great, and then if you would just maybe just give us your name and what you're affiliated with and And your question back there. Yes. Hi. I'm Wendy Richards I'm an outsourced chief marketing officer for investment funds, and I currently work for a large investment fund I am also individually a personally an investor in some sustainable Real estate properties The question I have is is related to the capital and it I'd like to ask you David as well as the panelists Which is what are the lessons for the large capital providers David? You've worked a lot in in funneling assets to the space and you've talked to investors each of you What lessons do you have for the investors? What are you looking for? What kinds of investors do you turn down? What do you how do you structure your products to entice investors? Why did you choose a read? You know these are the questions from the investor. How do we become better investors great? You guys want to take a crack at that and I'll Oh clean up, huh? All right Okay, so All right, so so so going into 2007 2008 I Think one of the most powerful things that actually happened in the downturn was that we got back to investment basics So the universal truth in the 2000s was everything should pay you 12% Every CIO knew better, but forgot every portfolio manager of an institutional fund forgot And they forgot and that part of it was also because of Wall Street got so creative across every asset class That every asset class became a spectrum of risk It used to be in the good old days the reason you invested and built a huge real estate portfolio and kept it for a long Long period of time were two reasons one. It was highly stable and if it clipped a 6% Reinflation adjusted coupon. That's what it was supposed to do for your portfolio. That was its risk profile That was its function and that's what you held it for the second word was duration in In general, you probably had a long duration obligation and you wanted duration match your asset All right, so it fulfilled a purpose in your portfolio in the 2000s and the run-up and arguably in the 19, you know the 1990s, but really the 2000s. We forgot all that 2007 2008 taught us now brought us back to basically risk How do you layer a portfolio and the proper function of proper assets? So so so one of the bugaboos in this industry and impact investing is that we all get convinced that There's some universal quote-unquote market rate of return. So we argue about market rates So I like to ask my students well good for the last five years if you operated a treasury bond portfolio What was considered good? 25 basis points. So if you were a 60 basis points 75 basis points performer you killed it It's all relative so so one of the most important things to think about when you think about agriculture is What function do you want it to have in your portfolio? All right, and and it's meant to be a long-term stable counter-cyclical inflation hedge asset protection mechanism It's not meant to give you 17 18 percent Kinds of rates of return for that you should go to a much higher risk portfolio All right, so one of the things for ag investors is Understand what layer of your portfolio you're trying to put it into Understand the second thing which is duration And this is another thing that I think that that the most sophisticated CIOs are starting to understand Which is somehow along the way we forgot that the 10-year fund life was an artifact of tax policy Somehow we thought it was some local maximization of something All right, and so one of the things that's starting to happen with the most sophisticated CIOs Is they're asking a really interesting question and by the way, you know The consultants are catching up to this And that is well geez if you guys are such great operators and you've built this wonderful asset and you're clipping me a Stabilized coupon and there's an embedded appreciation in this and by the way, I'm a pension plan So I have at least a rolling 30-year obligation and presumably a hundred-year kind of obligation Why do I want to force you to sell it? Because that would mean I'm tantamount to starting the business afresh again 10 years from now Minus the capital gain minus capital gains minus buying cycles all that so so so the most Sophisticated investors are now starting to ask the question. What can I do to have my cake and eat it too? Which is semi liquidity the ability to have some level exit inflows and Outflows, but the optionality of keeping the asset for a long period of time All right, so we're starting to see in these fixed assets hard assets or real assets a Rethinking about the structure. We're thinking back to what role do they play in the portfolio? And we're getting to a much more rational understanding of what the Appropriate rate of return and the just rate of return should be for that asset All right, I think that's what we're seeing that that's that's that's that's most interesting So I will contrast that from three years ago to today three years ago when we first started talking about hey You know we kind of got creative and that this portfolio can actually be converted into a long live vehicle. We can't do that Today the conversation is hey Can we do a side letter that allows us to retain this asset beyond its 10-year life because well geez you know So we're watching a very very rapid shift in in in this and and we're watching the Compensation mechanism for some of the large portfolio managers Really beginning to to I think correspond to this so one of the the portfolio managers that that that invested in in in our Ag product would tell you very openly if if I'm supposed to hit a 6% target if if my Portfolio returns year 1 is 12 year 2 is 0 year 3 is 7 year 5 year 4 is 5 I may not get my bonus because it averaged out the 6 because I had huge volatility I get my bonus if I hit 5 and a half 6 and a half 5 and a half 6 and a half 6 6 7 All right because that's the role. I'm supposed to play All right, so we're seeing I think a remarkable level of of risk Sophistication come back into and these are all the things you're supposed to learn in your finance class You guys want to take crack at that? Back there Hi, thank you Will Lana with Trillium asset management, and I just had a quick question for a for miss James about this organic price premium The difference between organic and conventional. Do you have a sense the last few years or recently? Is that premium growing is it decreasing you said there's a skull here to To have that premium shrink over time and when you're talking to different organic farmers or groups Do you think when they're? Modeling out or looking forward are they expecting and are they trying to protect that premium and keep it in place? Or are they planning on that premium to decline over time? You should subscribe to our data set and we'll You'll have all always be selling right? No, it's a good question You can look historically and see that there is you know There's a there's a sort of sometimes you'll hear people say organic is 2x conventional That's actually not true on the grain side. You've seen anything from one and a half to four times conventional over the past you know three years and Organic farmers are definitely interested in protecting that price premium one of the challenges for organic that happened last year year and a half ago as we had the drought and then Conventional commodity prices spiked so you were seeing it like seven eight dollar corn That actually was putting pressure on organic farmers because you can make a really nice living with eight dollar corn and with organic At you know ten eleven dollars at the same time the premium actually shrunk now Some of those farmers who maybe got out or you know are singing a different tune because we're seeing three dollar and fifty Cent corn and organic corn at twelve thirteen dollars a bushel, so you know it's the delta the basis is very volatile It absolutely plays into the the decisions at farm level And you know that's that's our job is to report that so that people can you know whether you're an asset manager Whether you're whether you're an asset manager because you're a farmer or whether you're an asset manager because you're trying to keep track Of what where investment opportunities are that that data is important so from a big trend perspective as well you have to remember that the Organic food market is over four percent of the US food budget, and it's over about thirty four billion dollars a year and the Certified organic farmland is only around one percent of US farmland. That's only growing at about eight and a half percent per year So you have really you know a the demand market Continuing to skyrocket But the supply of organic farmland which is needed to grow organic crops Really not keeping up, and so that's why there's a big opportunity. That's why we think the price premiums will will be maintained and And the markets will continue. How about one more question, and I'm gonna throw a curveball Up here. Yeah. Hello. Yeah. Hi. My name is Chris. I'm leading a United Nations environment program project in Colombia and Peru and my question goes more into the Yeah, international discussion, and this is all very much United States focused So I don't know if you have any ideas You started with the small landholders from Guatemala. We are focusing on 2.5 billion Small landholders worldwide working mostly with data management and software. So Candice we are creating an asset class can is there an opportunity to have Access to to price data, but also if I present triple bottom line returns. Is there an interest for investors? So just just quickly. I mean we focused we started focusing on the US and Canada North America Just because we had to start somewhere, but already we're looking at coffee We're looking at a number of soft commodities where the supply is outside of the US the demand for organic Anyway, still comes largely from the US That's about half and then you're up another you know 40% and then you know the balance by Canada and Japan So I think there's a real a growing opportunity because there are you know these domestic markets that are overseas For organics I think are growing but so far that's why our focus has been you know on the US to start Yeah, I think that what? Kelly is doing actually has tremendous tremendous implication for the small stakeholder farmers and specifically for the co-ops And I don't know if this is okay to talk about but maybe you can talk a little bit about the whole potential upcoming sesame I mean that's absolutely right the heart of Small-stakeholder yeah to give me an example of how this can impact the supply farmers in developing countries We're looking at doing an organic sesame seed auction And this is you know very small farmers one hectare two hectares in Africa in Uganda And it's opening up new markets for them So it's it's it's income for for small farmers and it's you know our job is to lower the transaction fees and increase Transparency so that's that's what good markets do And so you know just to give you a scale for that This is what a two-point at the cover level for about 2.5 million dollars of product A thousand metric tons about 2.5 million dollars, but it's now creating a more efficient marketplace and the the the supply side for that 2.5 million a thousand metric tons of Sesame is again small farmers and so you're creating something that is I mean you know you imagine yourself right? You're some small farmer in Tanzania and now you're you're technically visible to the global markets and the off-take on this are large Bakers large hummus makers large food producers. So This is this does have huge implications and it's very exciting the other thing is the dirty little secret in the United States is that a Huge proportion of our organic grains are imported from South America because we don't have that much land And so again, this is actually a global marketplace, and we don't typically think of it that way All right, I know we're coming on short on time. I have one question and again no great answers You guys have a position on GMO Yeah I have a degree in biochemistry and molecular biology when I was in high school I wanted to start a genetically modified pet store, so I like the technology I think that genetic modification is a tool and Unfortunately, I think it's being used in a very bad way. I think it's being used to promote unsustainable agriculture practices such as monarch large-scale repetitive year after year monocropping and that's a poor use of the technology and it's affected by subsidies and other things and Our fund we get our land certified organic, so we actually don't use it on our land But the technology could be good, but it's really not being used that way Yeah, the short of it is I would agree with Craig. It's uh, I Personally have my own fears as I think many people do I think when you actually look at the science today, there is a lot of competing science there You know, we're a member of the non-gmo working group. There is you know, still not Truly agreed upon from a peer-reviewed academic perspective what the impacts are there's still a lot that we don't know But I think the execution of it today has been horrible again. I agree with with Craig from a monocrop biodiversity perspective You know it if you look at how it's being implemented and executed that I think is the biggest Risk there's still a lot that we that we don't know and you got to label it Yes Yeah, you have to label it. I will take a little bit of a contrary and I mean we report prices for non-gmo's We obviously have an interest in non-gmo and organic continuing to exist and grow But when you talk to farmers a lot of times, you know, we mentioned the fact that the average farmers closing on 60 years old They're managing a thousand acres of land with like a half a dozen people GMOs have been a labor-saving device. It's the only way you can work 2,000 acres with three people You just that's what they are using it for so I think it's important to understand if you want to change Agriculture and change what the normal practices then I think it's it's helps us all to take a clear-eyed look at why people are doing it And the fact that you know, you know who your seed dealer is, you know, where are you gonna get the non-gmo seed? Is it out there? Where are you gonna take it? You're gonna haul it to the local elevator Are you gonna you know, do you know who's gonna buy it? So those types of questions are the types of questions that consume me and I spend I think the system will shift if we solve for those questions Hey, you guys have been great. Thank you so much