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Exclusive: Pipeline Foods plans organic transition debt fund

Following a pilot program, the AMERRA Capital Management affiliate will target impact investors for a vehicle it plans to raise in 2019.

 

Pipeline Foods has created a mechanism for providing loans to US farmers undergoing the transition to organic certification that it hopes to use as the basis for a debt vehicle targeting impact investors in 2019.

On Thursday, Minneapolis-headquartered Pipeline announced the official launch of its Farm Profit Program, under which it will provide farmers with agronomic advice and support in creating marketing plans for organic crops, achieving and maintaining USDA organic certification, and accessing equipment and inputs.

The assistance Pipeline will offer will also include help in managing applications for a transitional certification designed to allow growers to reap some premium for crops grown during the three-year period that precedes official USDA organic certification.

“Agronomists, farmers, products, services: these are all choices that are made in the conventional world. It’s just that in the conventional world you can find a one-stop shop. That hasn’t been created in the organic world yet,” chief executive Eric Jackson summarized to Agri Investor.He added that in some instances, Pipeline will also offer loans to farmers undergoing the lengthy transition to organic, which is widely seen as a major obstacle to increasing the less than 1 percent of US farmland currently USDA-certified as such. He said the level of economic support that a farmer might need during the transition typically ranges from $50 to $300 per acre on operations of between 400 acres and 5,000 acres. Pipeline hopes to help facilitate the transition to organic on 500,000 US grain and oil seed acres in the next three to five years, Jackson added.

While the company plans to self-fund the financial assistance component of the Farm Profit Program this year, Jackson said that Pipeline will treat it as a pilot program, designed to gather experience and data that will help solicit investors into a vehicle dedicated to such loans in 2019.

“We are in preliminary discussions right now with folks that are taking an impact-investing view towards soil health and regenerative agriculture,” he said. “It’s a different category of investments; it’s not a real asset investment. It’s a debt vehicle that is intended to attract and engage with a different group of investors.”

Jackson declined to specify a target for the vehicle, but said that impact investment objectives that Pipeline hopes the transitional support program could help meet include water quality, clean food, pollinator habitat and others.

Future expansions

Launched in February with backing from AMERRA and Pipeline Opportunity Partners, a consortium of four investors, Pipeline is working to create a global supply chain dedicated to organic grains and oil seeds. So far, the effort has included the acquisition of grain elevators dedicated to organic product in North Dakota and a neighboring region of Canada, with plans calling for expansion “across several continents,” according to Jackson.

He explained that as the company, which already maintains an office in Argentina, expands its supply chain into international markets, the Farm Profit Program could expand along with it.

“Any place where we have a first-hand presence of some sort, those are regions where we could possibly take the Farm Profit Program in the future.”

In looking to bring together its network, Jackson said that Pipeline is starting by looking for partners within regions that already have clusters of organic farmers. So far, he said, that search has revealed farmers who made a conversion to organic production due to personal health or environmental concerns, though there are a variety of factors that can contribute to the creation of such clusters.

For example, the Farm Profit Program’s first regional office is located in Malden, Missouri, where Jackson said that the earliest signs of glyphostate resistance about 10 years ago encouraged a widespread conversion to organic production.

“There is a pretty strong herd mentality in the farming community,” Jackson said. “To the extent that you find that people that have been successful and are willing to take the arrows of breaking away from the herd, that starts a new movement and successes begets success.”