“Imagine a map on a screen of Southwest Kansas and there are about 1,000 dots on it. All of those dots represent stacks of residue that we’ve collected from farmers’ fields in that area,” Bill Levy, chief executive at Pacific Ag, recently told AgFunderNews. The company, which is helping farmers and other industries cash in on new and clever ways to use the residues left on fields after harvest, today received $7 million in investment from Advantage Capital Agribusiness Partners (ACAP). ACAP is one of the funds recently certified through the U.S. Department of Agriculture’s (USDA) Rural Business Investment Company (RBIC) program.
In April 2014, the USDA initiated the program to help propel business growth across rural America as part of the Obama Administration’s Made in Rural America export and investment initiative. ACAP, the first licensed RBIC, raised $154.5 million from nine farm credit organizations in April and is managed by Advantage Capital Partners. The fund focuses on businesses involved in the production, processing, and supply of agricultural products. Pacific Ag is its fourth investment.
“Pacific Ag is part of a growing agricultural movement dedicated to sustainably extracting more value from each cultivated acre by turning ‘waste’ materials into feedstock for multiple markets and industrial applications,” Tim Hassler, principal at Advantage Capital Partners, said in a recent press release on the funding. ACAP’s prior investments include Iowa Cage-Free, in February, North American Natural Resources (also known as American Botanicals) in March and Hortau in June.
While the practice of collecting post-harvest residues and repurposing them is not entirely novel, Levy reports that the industry has really started to take off over the last five years. The company obtained this recent round of growth capital in order to give it the capital it needs to start taking advantage of the many emerging opportunities for residue repurposing. “All of these markets are doing really well and as the largest company in the U.S. doing what we do, we are well positioned to engage in each one of these markets,” explains Levy. “This funding opportunity made perfect sense and as soon as ACAP saw the position that we were in and all of these markets, it was clear that they were a great partner.”
Just how many ways can you repurpose residues? The options include everything from cellulosic ethanol plant inputs, feed markets, growing beds for mushrooms, and tree-free pulp for paper products. In fact, you may drive past some of Pacific Ag’s residue harvests on your next trip down the freeway. “The waddles in the blankets that you see alongside the freeway and the netting that’s used to fight erosion are commonly filled with wheat straw, one of the most common residues that we collect.” The second most common residue is corn stover, which includes the leaves and stock from corn plants.
Pacific Ag pays farmers by the ton for their residues, with prices varying between types of residues. The company then sells the material to a wide variety of companies who give it new life. “In most cases, growers see about a 10 percent bump in return,” says Levy.
Part of the company’s success can be attributed to Power Stock Pro, the software program Pacific Ag developed in order to increase efficiency and logistics. “It shows us field locations through its extensive mapping as well as a visual inventory. We capture not only pictures and GPS locations for every single stack of residue sitting on a farmer’s field, we also track the quality,” says Levy. “The residues are tested for various attributes and we have a historical database full of specifications cataloging different residues and different areas from different growers.”
According to Levy, this comprehensive software system is what sets them apart from their competitors and helps customer’s see the real-time advantages of enlisting Pacific Ag’s services. From an internal perspective, the software helps optimize logistics and ensure that deliveries are made as quickly as possible. “This has never been done at this scale. We are essentially operating on a clean slate in this industry,” says Levy. “On the one hand, it’s great because we are a pioneer in this process, but on the other hand, making your own way presents certain challenges. You can’t really look over the fence and see what the other companies are doing.”
Sustainability also plays a major role in Pacific Ag’s operation. “Each year, we conduct trials in farmers’ fields to make sure the removal is not only sustainable, but benefits the crop,” says Levy. “We want to make sure farmers are seeing higher grain yields.” The practice of removing residue from fields has been subjected to many university-based studies, which have shown the enormous benefits and sustainability of the practice. “From an operations standpoint, the biggest thing we do is make sure that once we understand the grain yields in a certain area, we are selectively removing the right amount of residue.”
Most importantly, Pacific Ag’s service is quite simple for farmers to integrate while also offering a boost in both yield and profits. According to Levy, the only thing that makes some farmers apprehensive is a lack of experience with having residues harvested from their fields. “If a grower has 1,000 acres, we typically ask them to give us 100 acres and let us show them what this can do. Generally speaking, once we get that 100 acres, we end up with a majority of the farm that same year,” says Levy. “We show them that we take care in arriving on time and removing the right amount of residue. and they typically stay on board indefinitely after that.”
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