U.S organic food sales now total $25 billion according to the Organic Trade Association’s 2010 Organic Industry Survey. This represents a 20% annual sales growth since 1990.
But there are two challenges confronting organic food sales:
One is the retail price of organic food. Organic food typically costs more. And in this recessionary economy that is a real barrier to increasing sales when consumers are trying to manage their budgets.
The second challenge is a limited supply of organic food due to limited availability of organic farmland. Only 0.7% of U.S. farmland is organic. This is classic economics where constricted supply means higher prices.
The obvious solution is to build economies of scale in organic farming to create a lower priced supply of organic food.
At the recent Investor’s Circle event held in San Francisco I met Craig Wichner, Managing Partner of Farmland LP who has developed a very creative solution for building more organic farmland. Farmland LP is an investment fund that buys chemical-based farmland and then converts it into organic farmland using best practices in sustainable farming. Farmland LP addresses three challenges of creating more organic farmland:
- Raising funds from investors by offering an attractive combination of asset appreciation and cash flows
- Implementing sustainable farming best practices that will gain certification of the farmland as organic
- Recruiting and managing quality farmers who lease the organic farmland in a crop rotation process that ensures the farmland maintains its organic credentials.
In 2010 one of Farmland LP’s properties, Fern Road Farm, avoided using 19,600 pounds of synthetic nitrogen fertilizers and 595 pounds of pesticides while also increasing revenues by 40%.
Watch this video interview with Craig on his best practices for growing organic farmland to a scale that will sustain lower prices for organic food:
Bill Roth is the founder of Earth 2017, a website posting analysis and trends on the emerging $10 trillion global annual revenue smart, healthy and green economy. His book, The Secret Green Sauce, profiles best practices of businesses making money going green.