Editor’s Note: Anna Aspenson is an associate at the Croatan Institute, an independent, nonprofit research institute whose mission is to harness the power of investment for social good and ecological resilience with a particular focus on regenerative agriculture. Here she writes about the institute’s new report about the need for infrastructure investment in regenerative agriculture supply chains. Her colleague David LeZaks will be hosting a webinar on August 4 to dig into the details alongside representatives of the California Natural Resources Agency, Ciénega Capital, and Flexible Capital Fund – sign up here.
The Covid-19 pandemic highlighted some of the issues our food system faces when it comes to supply chain resiliency. In its wake, many stakeholders have pointed to regenerative agriculture as a way to build a more decentralized food system while tackling climate change. But like any farming operation, regenerative producers rely on small-to-mid scale supply chain infrastructure to process, transport, and market their products.
Their unique business models require innovative and patient forms of capital to grow and succeed.
Building on Croatan Institute’s 2019 report, Soil Wealth, our new report — Investing in Regenerative Agriculture Infrastructure Across Value Chains — details the importance of supporting small-to-mid-scale, mission-aligned infrastructure to process, transport, and market regenerative food products.
The report is an attempt to give a broad look at the business models and financing structures that have demonstrated success in serving this sector. It identifies financing opportunities and pathways to building resilient value chains for regenerative farms. Its findings are informed by over 100 regenerative agriculture infrastructure businesses based in the United States and interviews with 34 capital providers, regenerative business owners, and technical assistance practitioners.
The report details key lessons learned for investing in infrastructure that honor the unique needs of regenerative agriculture enterprises. Here are a few takeaways to whet your appetite:
- It’s a new space, but the playbook is growing: Although regenerative agriculture is nascent, there are already a number of movers and shakers coming up with innovative business models that are attracting capital. In the meat processing space, for example, the report highlights four case studies of meat processors in Minnesota that are serving regenerative meat producers in the region. Funders and capital seekers should add existing success stories to their playbooks instead of architecting every deal from scratch.
- Reduce the risk with non-financial mechanisms: Many of the infrastructure businesses profiled in the report leveraged a variety of financial and non-financial resources. This includes integrated capital stacks and government grants, but non-financial de-risking measures like policy and technical assistance can play a key role. As an example, the New York City Greenmarket, a network of producer-only, open-air markets across the city, instituted a rule requiring bakers to use at least 15% locally grown ingredients. This helped to incentivize the purchase and use of regionally grown grains.
- Capture price premiums: One of the reasons producers and funders are attracted to regenerative agriculture is the opportunity to help producers capture price premiums for their products that reflect their regenerative growing practices. Currently, farmers, unless they’re doing small-scale direct marketing or farmers’ markets, have few opportunities to access markets without the necessary infrastructure elements. Developing shared ownership structures for processing, manufacturing, marketing and/or distribution helps shift producers from price takers to price makers, which improves farmers’ profitability. Creating a variety of direct-to-consumer, restaurant, and institutional markets for diversified distribution channels will improve the resiliency of the system.
Guest article: Farmers aren’t buying today’s ag robotics model. You shouldn’t either