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Peoples Company launches cover-crop initiative in bid to boost land value

The program aims to bring the focus of the farm management industry from boosting cash yield to long-term appreciation, in keeping with the objectives of many institutional investors, says president Steve Bruere.

Peoples Company has added a cover-crop service to its farm management offering designed to address a misalignment between current farm management practice and the ownership structure of much of US farmland.

The Iowa-headquartered farmland broker, manager and investment service provider partnered with Stine Seed, also of Iowa, to launch its Sustainability Cover Crop Initiative earlier this month. Under the terms of the program, farmland properties of between 120 acres and 10,000 acres managed by Peoples Company over a term of at least three years can be planted with oats, wheat, barley or radishes after harvest.

In addition to providing protection from the elements during winter months, Peoples Company said such crops also improve soil quality, and thus return on investment.

Though past efforts to promote planting of cover crops focused largely on encouraging farmers to do so themselves, Peoples Company president Steve Bruere told Agri Investor its initiative is part of an effort to encourage landowners to recognize their vested interested in the practice.

Because the investment thesis for farmland focuses on appreciation rather than cash yield, he added, the cover-crop program could be a good fit for institutional investors, especially those with a distinct sustainability focus. Because individual producers are often farming land on short-term leases, Bruere explained, few are incentivized to plant cover crops, which cost about $30 per acre to plant, because benefits accrue only over the long term.

“In other forms of commercial real estate, the property owner invests in parking lot maintenance, they invest in the building’s maintenance,” said Bruere. “In agriculture, so much of this has been directed at the farmer, and the landowner hasn’t exactly taken a vested interest in these long-term metrics, and we’re just trying to change how people are looking at it.”

A new style of client

Most institutional investors active in farmland manage their properties internally, according to Bruere, making it hard to say definitively how much Peoples Company’s cover-crop program differs from their practice. While there are some that have made sustainability and soil health central to their approach, he said, others remain exclusively focused on maximizing cash return.

“When all this institutional investment started to move into agriculture, frankly, I don’t think the farm management industry was equipped to handle that style of client,” said Bruere. “I think, honestly, it was in some ways a failure of our industry to not have the ability to offer that superior appreciation.”

The partnership with Stine, said Bruere, was motivated in part by the company’s desire to test a high-population corn seed capable of producing between 40,000 and 50,000 plants per acre as opposed to the traditional 30,000 to 35,000 plants per acre. As such, its initial focus was on the corn-producing regions of Illinois, Minnesota, Missouri and Nebraska, said Bruere.

“Since we’ve released this, we’ve had folks from all over the country reaching out and if there are other markets where it makes sense, we’ll offer the program,” he added.

Topsoil triage

On the farms it manages directly, Bruere said, Peoples Company has found that about 15 percent of every field is usually not profitable. In response, the company is developing management plans to concentrate investment on the 85 percent of land that is profitable on each property, Bruere said.

For example, on one farm it manages, he added, Peoples Company has found that the use of cover crops can contribute to a reduction in top-soil loss from the equivalent of 40 dump trucks of soil a year to just six.

“Topsoil is a finite resource. Once it’s depleted, it’s gone forever,” said Bruere. “You don’t notice that thickness of a dime on an annual basis that you’ve lost. But you do that over a 10- to 20-year period, and then, all of a sudden, those farms that are not farmed responsibly, that have been taken advantage of and not cared for, they eventually lose their ability to appreciate.”