IFC acquires Washington apple companies amid active market

Washington agronomist Stu Turner tells Agri Investor that a large apple crop in 2017 has helped financial investors play an increasingly active role in the state’s farmland market.

International Farming Corporation plans to combine three Washington State fruit companies it acquired last month amid what market observers say is a rush of institutional investment into the region.

Kinston, North Carolina-headquartered IFC announced in late January its plans to combine the companies – Legacy Fruit Packers, Valley Fruit and Larson Fruit – that it had acquired for undisclosed amounts into a single entity called Colombia River Orchards.

All located in Washington’s Yakima Valley, acquisition of the three companies included 4,000 acres of orchards, which IFC said it hoped to add to, as well as storage and packing facilities capable of processing four million boxes of fruit per year.

In September, IFC secured a $250 million commitment from the $132.3 billion Washington State Investment Board for its IFC Core Farmland Fund, an open-ended vehicle targeting $1.5 billion to support a strategy designed to produce annual returns of between 7 and 9 percent through creation of a diversified farmland portfolio.

According to a regulatory filing shown Monday, the vehicle has raised a total of $404.04 million from three investors.

The apple-focused acquisitions creating Colombia River Orchards were disclosed soon after Agri Investor reported the C$193.9 billion ($147.82 million; €129.29 million) Ontario Teachers’ Pension Plan’s December acquisition of another large Washington State apple orchard for an undisclosed price.

“It does seem like institutional investors are moving into the apple space,” a source familiar with the market confirmed to Agri Investor.

Stu Turner, an independent agronomist based in Eastern Washington, told Agri Investor that IFC’s investment fits a pattern of consolidation that has been propelled by the effects of a particularly large 2017 apple crop, which depressed producers’ prices and earnings. Another important factor, according to Turner, has been an increasing focus on export markets he expected to continue accelerating as China slowly opens to more GMO crops.

“Ten years ago, there were 100 sales desks, now there are a dozen,” Turner said in reference to the traditional customers of family-owned operations such as those IFC purchased.

“That same consolidation is starting to happen on the field side. If you don’t affiliate yourself and get bigger, you are going to get marginalized and your cost structure isn’t going to be competitive.”

Whereas historically, according to Turner, apples trees in Washington were maintained for as long as 40 years, the desire to keep pace with evolving consumer preferences has meant trees are now productive for an average of about 15 years before they are replanted.

Strategies differ in focusing on either converting existing orchards to new varieties or developing new properties, Turner said, adding that development costs as high as $35,000 per acre have helped define a new role for the market’s financial investors.

“Most family farmers don’t have that in their jeans, they can’t get it from their local bank, they have to go to New York and get it from an investor,” said Turner.

Recent conversations with financial investors entering Washington State’s largely apple-focused fruit packing industries has suggested, Turner said, that such investors often focus on processing assets that can used across other crop types as they strive toward the efficiency benefits of diversified, large scale tree fruit operations.

“It’s just like chess; if you are not thinking two or three moves ahead, you are going to get your head handed to you,” Turner warned.