Chess Ag buys Arkansas farmland as it eyes vertical integration

Founder Shonda Warner described a focus on hazelnuts, blueberries and hemp and said Oregon’s Willamette Valley will become ‘the new Sonoma Valley.’

An affiliate of agricultural asset management firm Chess Ag Full Harvest Partners acquired at least 2,590 acres of Arkansas farmland late last year, according to local media reports.

Arkansas Business reported Full Harvest Agricultural REIT II had acquired farmland across three Arkansas counties for $11.2 million. A late 2017 regulatory filing showed Chess Ag as manager of a vehicle with the name Full Harvest Agricultural REIT II, which had raised $110,000 from 103 LPs that committed a minimum of $1,000.

The deals reflect continued US South activity by longtime farmland manager Chess Ag, which has recently focused on vertical integration of hazelnuts, blueberries and other crops in the Pacific Northwest.

In late 2010, the Arkansas Teacher Retirement System established a $25 million separate account with Chess Ag designed to contribute to a $100 million farmland allocation. At the time, ATRS staff described Chess Ag as a regional farmland operation with an emphasis on the Mississippi Delta States and limited Midwest presence.

“Chess Ag will select and purchase farmland operations as well as select farm operators, monitor their performance and provide technical support to those operators,” according to ATRS materials.

The firm – which declined to comment – was established in 2006 by Shonda Warner, who previously served as London-based partner for investment advisory Montier Partners and spent six years as a proprietary trader for Goldman Sachs in London and Tokyo, according to her LinkedIn profile. The profile shows that prior to joining Goldman Sachs in 1990, Warner spent six years grain and financial instrument trading at Cargill.

“We don’t/can’t comment to the press about the specifics of what we do,” Warner told Agri Investor in an email.

In a 2019 podcast interview, Warner described Chess Ag’s evolution from row, permanent and specialty crop farmland towards acquisitions of ancillary businesses and eventually the vertical integration model being pursued through a company called Farmacopia Farms. In a separate July 2021 podcast interview, Warner said her current focus was hazelnuts, blueberries and other crops in the Pacific Northwest.

“The new Sonoma Valley is going to be the Willamette Valley,” Warner told Cambria Investment Management’s Meb Faber. “The problems are going to be absolutely everywhere, but the Pacific Northwest will be in the ascendance. We have good soil, decent water and California is struggling.”

In both interviews, Warner discussed Lebanon, Oregon-headquartered Farmacopia as a direct-to-consumer channel for hazelnuts, hemp and CBD products. During the interview with Faber, Warner suggested the company could eventually offer a more efficient vehicle for getting public capital into ag than fractional farmland ownership platforms.

“One of the bottom-line takeaways after walking the paths in the communities and the roads, trails and the fields all these years, is that if farmers can take back a little of their power from the 57 middlemen that have wedged themselves between the fields and someone’s plate, that would be a good thing,” Warner told the Future of Agriculture podcast in 2019.

“We’ve decided to add some value-added processing to some of the things we farm ourselves. Soon, we will do some value-added processing for other farming friends that we know that are doing innovative, sustainable, intelligent things and are making quality products.”

Chess Ag managed $150 million as of the end of 2019, according to its most recent UN PRI annual survey. Warner told the Kansas City Business Journal in September 2018 the firm targeted annual returns of between 8 percent and 12 percent for clients including pension funds, endowments, family offices and high-net-worth individuals.

During the 2019 Future of Agriculture interview, Warner mentioned the Dow Chemical pension fund as an investor in Chess Ag’s first fund, which closed on $30 million in June 2008, and that the firm’s second fund closed in mid-2012. The Dow Chemical Employee pension plan, which did not reply to messages seeking further detail, invested $21 million into Full Harvest Fund I, according to non-profit GRAIN.

According to an April 2020 Meketa Private Markets market overview presented to the State of Connecticut Investment Advisory Council that described a vehicle called Full Harvest Agricultural Opportunities Fund III, Chess Ag’s strategy focuses on “buying farms with technology at the forefront of agricultural change.”

“Chess Ag raised two prior funds before launching their third vehicle in 2017. The fund has had difficulty raising capital [sic] looking to transition to more institutional investors,” according to Meketa.

A source familiar with the firm and US farmland markets told Agri Investor this month that Chess Ag has been active in the US South.

“They’ve had some challenges with what they’ve bought and how they’ve bought it,” they added. “I think they maybe have their game plan sorted out now, but they had a few rough years.”