June 1, 2025 • 45 mins
Kyle Maple and Pete Drost, professionals in the farmland investment space join hosts Todd Kuethe and Chad Fiechter in this episode of Purdue Commercial AgCast. Maple and Drost share their backgrounds, roles within US Agriculture, and day-to-day tasks in farmland asset management. They share how they identify investment opportunities, source deals through various networks, and the importance of both financial knowledge and effective communication in their field. The discussion also touches on the challenges of managing permanent crops, the evolution of investment management firms in agriculture, and the balancing act of maintaining long-term relationships with farm operators. The conversation provides a look into the impact of water regulations, sustainability in farming, and educating investors about the benefits of farmland as an asset class.
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Episode Transcript
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(00:00):
Thank you for tuning in.
(00:01):
My name's Todd Kuethe.
I'm a professor here in the Departmentof Agricultural Economics and part of the
Purdue Center for Commercial Agriculture.
I'm joined by my co-host
Chad Fiechter also an Ag Economist here inthe Department of Agricultural Economics.
So we are economists.
We're trying to learn and figureout how the ag economy works.
So we have a series of conversationsin our regular job trying to figure
(00:21):
out, we don't understand thisproblem, how the economy works.
And so we started recording them.
This is our second episode that we'vereleased, so if you're tuning in for
the first time, you can go back andcheck out the one we did with Matt
Erickson, which was outstanding.
We talked about Senate AgCommittee, how that works.
Tell us a little bit who we'remeeting with today, Chad.
Kyle Maple and Pete Drost, they weregrad students in this department and they
(00:44):
now work in the farmland investing spacefor a farmland investment company in
Indiana,
in Indiana, US agriculture.
I've heard you describe ourpodcast, one of you use is
sort of peeking under the hood.
Trying to figure out howthis stuff actually works.
Yep.
And I think the farmland investmentspace, something we hear a lot of
(01:07):
people ask us questions about oryou'll definitely hear opinions about
it, but we think it's like somethingthat we don't totally understand.
Exactly.
We think a lot of people also don'tunderstand, maybe even misunderstand it.
Right.
So Kyle, why don't you introduceyourself to the audience?
Tell us who you are.
Yeah.
Kyle Maple.
I was born in Kokomo, Indiana,raised on a grain farm.
Pete and I work for US Agriculture.
(01:30):
It's a privately held investmentmanagement firm focused on
the farmland asset class.
My role currently is directorof asset management, so oversee
acquisitions and management of thethe properties in our portfolios.
Perfect.
Pete, do you wanna introduce yourself?
Yeah.
Pete Drost.
I grew up on a farm, although.
Not in Indiana.
I was actually born in Canada,lived there till I was about seven,
(01:53):
and then kind of moved everywhere.
Ended up in the Texas panhandlefor a little bit of time,
and then went to Oregon.
I lived on a hay farm out there and thenpicked a college close kind of to Canada.
Ended up at Purdue and then, yeah, asKyle mentioned, worked for US Agriculture.
He's my boss.
I'm an investment analystthat works under him, so.
Perfect.
So for our audience listening athome, it might be helpful for them to
(02:15):
envision a face to put to this voice.
So, which celebrity to both Kyle andPete have people told you, you look like?
I actually have one.
I've, I've had multiplepeople tell me this.
It's mainly happened when I wasan undergrad in the tailgating
fields here at Purdue, so I know.
Yeah.
Uh,
So it has to be true.
Yes.
The main actor in DexterI've been told I look like.
(02:39):
Your tailgating persona looks like Dexter.
That's what I've been told.
Okay.
Alright.
Like see, Pete, whathave, what have you got?
He means business.
That's right there.
That's right.
I've been told lately,Will Ferrell probably.
Okay, I can see that.
Yeah.
Or the guy from Napoleon Dynamite.
The main character there.
Okay.
So if we could get into kind of what isit that you guys do on a day-to-day basis
(03:01):
Basically, so Kyle manages,he's asset manager and under him
there's a bunch of farm managers.
And then those farm managers, they'llcome across various deals and then
I'll be the first point of contact.
So one of my opening tasks, if we'regonna look at a farm to potentially
invest in is I'll get a acre numbers,historical yields a rental figure, and
(03:21):
then I'll kind of do some back of thenapkin math on it to see if we should
entertain making an offer or not.
Then assuming we have a good offer priceand then an LOI will get sent out and then
if that gets accepted, then it'll come.
Whoa.
What is an LOI
Letter of intent.
Okay.
Okay.
And I wanna go, I wanna go back.
So these farm managersare all over the U.S.?
(03:43):
Yeah.
So Kyle was Midwest, all theway down to North Carolina.
And then out west allthe way up to Colorado.
Yep.
And then across the ContinentalDivide, there's another farm manager
who manages all the Pacific Coastassets from Idaho all the way down
to Imperial Valley, California.
And then in the south there's another farmmanager that manages that region as well.
(04:05):
Yeah.
So when you say like they're comingacross deals like this is just
these, they're in the communities and
Yeah.
So,
and they're seeing signs.
What, what, how do you,
A big part of what we do to tryto meet the demands of our clients
is, is find stakeholders that haveaccess to or, or knowledge of local
marketplaces and farmland thatthat could come available for sale.
(04:27):
That's a wide ranging group of people,but we're constantly trying to broaden
our contact base, whether that bebankers, appraisers, real estate
Oh, I see.
agents, farmers, right.
Yeah.
That, that are looking for, for capital.
And so hitting on all those networksand trying to find access to land
that that could become availableand, and hopefully purchased by us
(04:48):
and managed by us going forward.
And then maintaining relationshipswith operators going forward when we
purchase an asset for a client, thosefarm managers, including myself are
tasked with managing those properties.
A lot of times that is through apassive lease, structuring a lease that
works for both sides of the equation.
The farmer, uh, as well as our client.
And, and so it's an ongoing relationship.
(05:10):
We hope it's the start ofa 20, 30 year relationship.
I see.
So, so like when you think aboutthese, these clients, so these
are folks that are looking to getinvestment exposure to the agricultural
sector for some reason, right?
It meets their portfolio needsor investment objectives.
So, thinking about like myself, right?
So I've got a retirement portfolioand I've got a financial manager,
(05:33):
and sometimes we set a goal, right?
If he says like, oh, you shouldbe like putting away this much
money for every time, right?
Or, you know, I've got moremoney than I thought we had.
Like, so we were getting some renovationsin our house and it didn't cost as much.
So I, I'll have more to putin my retirement account.
And so I'll go to him andsay, I've got this much money,
can you help me deploy it?
Right.
So how much is it like people comingto you saying, we've got this much,
(05:56):
we're looking to invest, and thenyou go find those investments?
Versus you see some kind of investmentopportunity and then you go to your
existing clients and say, Hey, if you'reinterested, there's also this opportunity,
or is it, does it work both ways?
Uh, or is it one way or the other?
Primarily it's the first.
We have a director of businessdevelopment named Evan Newton, who's
constantly out there knocking oncapital doors trying to raise capital
(06:18):
that has interest in this marketplace.
And you are correct, Todd.
What they are trying to accomplish istypically it's institutional investors
like a pension fund that we are courtingand they are interested in this space
because it's a great diversification frombonds and equities and, and historically
it's been a great inflation hedge.
It's a capital preservation, right?
(06:39):
It's, and, and, and prettyconsistent returning asset
with a consistent cash flow.
And those are kind of the main driversof why they wanna be in this space.
But we are going andactively seeking them.
And, and a lot of times thoseinstitutional investors, when they
want to change their investmentportfolio, they would have consultants
and they might put out request forproposals of, hey, we, we think it's
(07:01):
time to get into the farmland space.
Let's go out and, and try tosource who are the managers
we want to invest through.
So another thing that's difficult forthe farm audience to think about, and
you know this 'cause you're a farmerand Indiana farm families, like how big.
Like how many outfitsare there like yours?
(07:21):
Or like, is, is there, is there alot of people kind of in this space?
Is it relatively niche andsmall and there's a handful.
Like could we fit 'em in a car, fit'em in a bus, fit 'em on a cruise ship?
Like what's the,
there's different sizes of buses too.
Yeah, that's, I didn'teven think about that.
Yeah.
See this is why Chad's here.
Yeah.
I should say those like littlebuses that like you get at the
(07:41):
airport to take you to the parking.
Yep.
Or like a full size city bus.
Yeah.
Or even one of those doublebuses that hinge, if you know.
Yeah,
Yeah.
No, that's really helpful guys.
See, this is good.
We're all learning today.
Yeah, that's right.
No, I started in this businessin 2011, and I would tell you
that it was a handful back then.
And it has grown.
(08:02):
There are more investmentmanagers in the farmland space.
Now, there are some thatare very specialized.
Meaning they are focused solely on, onsustainability, or even some of them are
focused solely on debt rather than equity.
To date we're an an equity investor,so, so trying to take fee, simple
title into the real estate itself.
(08:23):
So it has grown.
There are quite a bit more, I couldn'tput a number on it, but it, it's
been a space that has expanded.
Competition's expanded.
But, but not, but, but it's not likewe're gonna run into them all the time.
No, no, no.
It's not, it's not like a, like a
relative to equities or,or something like that.
Yeah, yeah.
Like it's, it's, we are a tinyinvestment class, and so the
(08:44):
amount of management firms inthis space align with that, right?
Yeah.
So, so more bus than cruise ship.
That's a good way to put it.
So short bus is not what we're saying?
Yeah.
Oh, man.
That's a, that's loaded.
It might be bus, what yousaid was It's a hinged bus.
It's like, it's a double,but not quite a double.
Yeah.
Yeah.
No, we, we were, we were avan and we might be a bus now.
Yeah.
I think that sounds right.
(09:04):
That sounds good.
Good.
All right.
Kyle, what's your day-to-day tasks?
Yeah, like Pete said, I actually stillto date do a lot of farm management, so
I'm out on the farms speaking with ourtenants and negotiating leases with them.
And then still sourcing newacquisition opportunities.
So again, trying to hit on a varietyof networks that would've access to
(09:26):
farmland and finding deals that, thatwould make sense for our, our clients.
On top of that, as my current role,I, I am also helping with acquisition
opportunities in other regions fromthe other managers across the U.S.
and so if we've got a opportunityin Idaho, I'm evaluating that.
Asking questions to make sure we'rethinking through all the variables
(09:49):
that, that try to, again, reduce riskfor our clients and, and, and the
investment of that specific asset.
So right now it's touching a lotof different real estate across
the country and supporting theother departments in our business.
So does that, does that.
Also include travel?
Like are you, are you physicallygoing to these properties to see them?
(10:09):
Yeah.
Like how, how often are you
Yeah
on the road?
Yeah.
I, I'd say at a minimumonce a month and probably
Okay.
more when you count just driving andseeing our farms here in the Midwest, so.
Okay.
It's a decent amount of travel.
Mm-hmm.
Luckily, probably not as much asother industries, but it's also good.
Right.
The only way you're gonna learn applesin Washington is to go out and see
what the bottlenecks are, see whatthe markets and the challenges are
(10:31):
of getting those apples from thefield to the, the packing facility.
So,
Yeah, 'cause the, the propertiesyou've purchased could potentially
be like long term crops as opposedto the traditional row crops that
we think about in the Midwest.
Yeah, we, we would segregate thoseas permanent crops and annual crops.
And in permanent crops,you're absolutely right.
You're talking trees, bushes, vines, and,and hey, there's a lot of value in those
(10:56):
assets above the ground, let alone thecost and and value of the dirt itself.
Mm-hmm.
So we do look at those differently.
In fact, many times, not all thetime, we operate 'em differently.
We will what we call directly farm, it'sreally, it's hiring an onsite manager
to take day to day operating decisions.
Oh, I see.
And we would own the crop, we wouldown the inputs going into that crop.
(11:18):
For the row crop land, corn, soybean,even, you know, some of those veg crops.
We have some farms up inMichigan, for example, that would
grow a variety of vegetables.
We're gonna passively leases, we'regonna find a high quality local operator,
like I said, hopefully, and developinga long term relationship where they're
gonna be on it 20, 30 years and, andconstantly just try to keep up with market
(11:40):
rental rates for that, for that land.
So, Pete, what about youas the more junior person?
How much time do you spend on the road?
More or less than Kyle?
Less so
May.
Maybe we should step back one step,which is, so Chad and I also, as
professors, we work with a variety ofstudents, undergrads, grad students.
Tell us a little about yourtraining that you did before this.
(12:02):
If I had a college sophomore thatcomes to me and says, man, this
farmland investment space is awesome.
I wanna work in there, what arethe activities that we should
tell those students to do?
Or skills they should pick up sothat they would be attractive to
you and other firms like yours.
Really, we, we are financially, you know,finance is a major part of what we do.
(12:23):
Farmland sounds like a pretty easy thingwhen you just buy and, and lease it.
But, you know, we work with a,what I'd call, uh, sophisticated
investors and they wanna understandwhat that asset class does relative
to some of their other investments.
So we do discount cashflow models to see what we.
Think that asset will return, calculatingpresent values and IRs and that goes all
(12:45):
the way down from just buying the farminitially to capital expenditure projects
that we wanna see done on the farm.
So a big part of that is, is you need tohave some understanding of, of finance.
I, I think it's 4 24 here inthe ag econ department, if I
remember right, is the, the class.
But Pete, what did Imiss there in your mind?
No.
Yeah, I'd say the financepart of it is, is huge.
(13:05):
And knowing those timevalue and money equations.
And then if you're gonna give astudent advice for once they're done,
their bachelor's degree and they'reconsidering going for a master's or
what they should do to be attractiveto an investment management company.
I'd say one thing I didn't learnabout until, I guess after I
started at US Ag was the CFA.
And it's, it's, it's anaccreditation program.
(13:28):
They have, I think it's like two or threeyears long, and it's just strictly on like
finance and modeling and time value money.
And they get into some theory, butnothing like you'd get into like
in a traditional master's program.
But yeah, so
My understanding is it's a little bitmore like pragmatic or like, like it's
(13:50):
more about like, you know, here's howyou buy bonds and here's how bonds work
and how, here's how you would sell bonds.
As opposed to like, theoretically,where do interest rates come
from or something, right?
Yeah.
So a little bit more on the ground.
I, anyway.
I, I too need to lookinto it a little bit.
No, I, I think you're right though.
I would always equate it to givea, a master's in MBA, for example,
(14:13):
in finance is probably somethingthat's gonna touch on a hundred
square foot, but an inch deep.
And this is, you know, a hundredfeet, a hundred inches deep and
one square foot is what CFA is.
I said that terribly, but I think
No, no, no.
I think you said that great.
Yeah.
And there, there's other tools like that.
There's also a, a charteredalternative investment analyst,
and, and that is very similar.
It's focused on, uh, it's.
(14:34):
It's a little bit of a shorter program,but focused on alternative investment
buckets and then farmland actually isincluded as an alternative investment.
So there are other tools tohelp you dig into and, and like
Pete said, a master's program.
Pete has his master's inagricultural economics.
I did the MS MBA program, the jointprogram with Indiana University
and Purdue University here.
(14:55):
Through the ag econ department.
So there's other ways to get training.
The only thing we didn't touch on that Ido think's important, and it's important
in anything you're gonna do from acareer perspective is, is communication.
I think it's, it's imperative thatwe are good communicators to both our
clients and to our operators on the farm.
And, and the only happens by, byspeaking with people, challenging
(15:17):
yourself to get up and, and do podcasts,whether you're good at 'em or not.
Okay.
That's us.
Chad, sorry about us.
He said not good Adam.
That'd be us.
Yeah.
What else should we ask?
Okay, so one of the questions I have isrelated to the job is like what surprised
you the most in kind of the roles thatyou have that you, you didn't expect?
(15:37):
Let's start with Pete.
I've been doing this toolong for that, that question
He has.
He's never been surprised.
He's never been, actually, thatdoesn't shock me outta you.
One thing that surprisedme, I'd say probably.
Well, I had really no exposure topermanent crops, but just the timelines
that are associated with when people getpaid on those and sort the cycles that
(15:58):
farmers deal with in that region of the,
So I too have no clueabout permanent crop.
W give me, can gimme likea concrete example of one.
So, like for example, like I didn'tknow that Apple's stored so long in
like controlled atmospheric storage.
Wait, how, how long do they store?
I don't, like, literally I am clueless.
Like, I think it's, I thinkit's like 12 to 18 months.
Oh wow.
In storage.
(16:18):
So like,
So when I'm buying an apple today,it might be like, it might last year,
might even been picked last year.
Yeah.
Wow.
So like, and all that stuff, youknow, then that affects how soon a,
you know, a farmer gets paid and thenyou think about like, you know, if
you're not gonna get paid and youknow, until next year, how do you.
And you had, you know, consecutiveyears of, you know, bad prices.
(16:39):
How does that impact yourability to get financing?
And then not only that, but just likethose crops that you know, aren't,
that don't have like a futures market.
Mm. You know?
Getting good price data.
If you're just entering a space,it's kind of hard to do, like
if, if you're not already there,
When you're putting together yourinitial analysis about whether
or not we should invest here.
Yeah.
Part of that is prices.
(16:59):
Right,
Right.
And then also what could youexpect to get from your yield.
Right.
Right.
And then two, like in permanentcrops is just like, like how variety
dependent a lot of stuff is too.
Like especially in apples and even likein, in blueberries and, and just, and
it's all prices and stuff that you, it.
Initially would be hard tocome by if you're not in the
industry, which really, you know.
(17:20):
Yeah, it really makes the, you know, theanalysis part of entering something like
that a little bit more difficult than
Do, do you have a pro tip of likea kind of apple, I should be eating
A kind of apple that you should be eating
Because this is a i I,
What's our greatest acreage?
You're like cosmic crisp.
I know.
So I've actually beendoing the Cosmic Crisp.
They're pretty good.
A good apple.
(17:40):
Yeah.
No, a buddy of mine,we had this discussion.
I was at a bachelor party.
This tells you like middleaged bachelor party.
Your talking apples.
No, the question was, what is the thingthat you spend a lot more than like
the regular, like the low, like Yeah.
There are things that we buy cheap andthere's things that we splash money on.
Right?
Yeah.
And it's like what is the thing thatyou would, would be the last thing you
would give up spending extra money on?
(18:02):
Yeah.
Great.
The elitist professor justsaid, splash money on it.
And I was worried about alienating people
And one of the guys at thebachelor party said, apples.
And I was like, I never, he's like,he's like cosmic crisp apples.
He's like, if it's cost more, I'mstill gonna buy 'em no matter what.
Like that's the, that's my jam.
And I was like, I've alwaysbeen a honey crisp guy.
(18:22):
And so he got me to convinced.
Switch.
But, but this is, thisis my, mine was coffee.
Just to let you we're not splashingmoney on like I'd get a better, I'm
like, I'm always gonna have the best.
Well we've had this discussion'cause mine is bread.
Yes.
Yours is bread.
Bread.
Oh.
Never guessed bread.
Yeah, no.
The thing about bread, Chad convincedme, is it's a way to have something
luxurious in your meal that's cheap.
So like.
(18:42):
Yep.
If you buy the mostexpensive, best bread, yeah.
That's still cheaper per like mouthfulthan doing the same thing with steak.
Yeah,
But I do like steak more than bread.
No.
So I'm not, I like bread more than steak.
I'm not disagreeing with you, but I thinkthat the thing is, is I love sandwiches.
So if you up the bread game, youcan take a, a mediocre sandwich to
(19:04):
a great sandwich with just bread.
Yes.
Yeah, I agree with that.
Agree or disagree?
Well, I'll have to give it a shot.
I'm, I'm pretty, pretty cheap on my bread.
I think.
See, we're already changingthe way people behave.
Yeah.
This is great.
This is really, okay.
Wait a second.
I wanna ask the Apple questionbecause like we've had, Pete, you and
I have had discussions about this,that, but those apples as we get
(19:24):
new varieties of apples and you getlots of investment in those apples.
Like Honey crisps are a lotcheaper today than they used to be.
Mm-hmm.
Right when they first came out.
Because we have so manyacres in Honey Crisp.
Are we seeing the same thing withlike cosmic crisp, like as more
cosmic crisps like, or how do they.
Control sort of thesupply of those apples.
(19:45):
Yeah, that's the, that's the hard partis that, 'cause it's such a long lived
asset that you know it, you know, onceyou have that oversupply problem, you've
already put so much money into gettingthis tree in the ground and producing and
all those years of non-productive, youknow, just dumping expenses into 'em and
then all of a sudden if everybody did thesame thing then, you know, it's, it's a
big deal to all of a sudden just rip thatout and, you know, put another variety in.
(20:07):
So there are some varieties.
Where those, those you know, rightsof who can plant what are more
controlled because of what's happened.
Okay.
Oh, there's like licensing or something?
Yeah, but with those, I mean,there's obviously extra costs, like
the people who control whether ornot you can plant those, you have
to pay them, you know, royalties.
Big apple.
Big apple.
Yeah.
When you think about the work that youdo and why people work with you, are you
(20:31):
marketing farmland to them as an asset?
Or are you marketing yourservices as the asset manager?
Oh, I like that.
Does that question make sense?
You know, I, I do think Iunderstand the question.
I I'm even gonna break itup even further, right?
Wow.
Yeah, yeah.
Easy, easy, man.
This is why we get pro here.
There's a whiteboard behind us.
(20:51):
Do we need, do you wanna marker?
Well, I do have a short term memoryissue, so maybe the... really
you're talking about two different.
You know, as, as, as we look atourselves as a firm, we're certainly
trying to sell our services and theasset class to capital of why it would
make sense in a portfolio and why wethink we're, you know, the standard
(21:12):
in, in management in this asset class.
But at the same time.
We're trying to sell ourvalue to the farmers, right?
Like, Hey, why, why are wea good resource for you?
Why, why should you consider usbeing a partner in your operation?
So I I,
Wait a second.
So you're saying these are thepeople who are gonna operate.
(21:33):
The assets that you buy.
Yeah.
These are your partners.
So these are, these are the tenants.
Yeah.
Yeah.
And you are saying you areconvincing them that you are a good
Look.
If we have a thousand acrehigh quality farm, it doesn't
take a lot convincing, right?
Sure.
Like, hey, we, we get people knocking onour doors wanting to farm that, but like
Sure.
At the same time, if we have farmerswho wanna free up working capital or
(21:56):
want to 10 31 into a, a, a piece ofground that sits right behind their
shop, you know, wanna pay off somedebt, just get in a better position.
We, we, we've done structures whereit's a sale lease back where we can,
yeah.
Okay.
Purchase the ground from them.
Yep.
And, and obviously enter a a, a leasewhere both parties feel comfortable
about the terms, feel comfortableabout establishing a relationship Yeah.
(22:17):
That, that we can foreseegoing into the future.
So in that scenario mm-hmm.
There is a bit of a sale of hey,here's why we could be valuable
to you in that arrangement.
Right.
And so, yeah, it's probablya little bit less when we are
bring, we have the land already.
We control a lot of farmerslook and say, Hey, I'm.
One way to grow my operationis to farm more acres.
Right.
And so I need to understand, I,I need to get to know those guys.
(22:40):
Yeah.
But at the same time, we, we can be analternative capital provider to farmers
outside of the traditional debt path.
So, so like if I own a farm
Yeah.
And I'm operating and I say like,you know, I want to pay off some debt
or maybe dial back or something, orchange something about my structure,
then I could work with you.
(23:01):
You would buy that farm from me.
I would lease the access backto farm for some amount of time.
Yep.
Would agree to.
Yep.
Yeah.
Okay.
And all that would be verymuch negotiable, right?
Yeah.
In that situation, the farmer ownsthe land, we're gonna come to him,
kind of, You're selling arms open.
Yeah.
Hey, hey, here's how we approach it.
We'll, we'll, I, I feel reallyconfident saying, we'll be very
(23:21):
transparent of what's important tous and, and how we want to establish
the start of this relationship.
And again, we're firm believers in,in trying to make this a long-term
relationship between us and a, and thefarmer, we think that that provides
aligned incentives to, to improvethe land and, and not make short-term
decisions to just, you know, get ahigher cash flow from that property.
(23:43):
So,
Okay.
Great answer.
So what, what would make the servicesthat you provide in this space successful?
Is it the knowledge of sort of farmingand you can communicate that to these
investors who are so far, like whyis an investor needing services?
(24:04):
Right?
This isn't, this isn't meputting you on the spot.
I'm assuming that there is a value, right?
What is that value that you bring?
Yeah.
Look, we mentioned it earlier.
Farmland as an asset class relativeto other asset classes is tiny.
It's not something that peopleare well versed in outside of, if
you're, you've, you've lived, livedin this industry, this world, right?
(24:26):
And so a big part of that is they wantto, capital wants to find people who
does truly understand that asset class.
What are the inherentrisks of that asset class?
Sure.
How do you develop a portfoliowhere, where we are going to get
that consistent cash flow returnthat, that preservation of capital
and capital growth at the same time.
Right.
That's a huge thesisin in owning farmland.
(24:48):
And so they would hire a group likeus because Yeah, we think two things.
We think we understand howto diversify a portfolio.
Mm-hmm.
Within an investment mandate.
Right.
So within a unique assetclass that's very small.
Yeah.
You're saying you can evendiversify a portfolio of farmland.
We, we certainly try to, andthat's done geographically.
That's done through crop type.
(25:09):
That's even done through operatingstructure lease type right
there, that you can get somediversification benefits from that.
And so that, that's how we go about.
And the, the second thing thatwe're really proud of and, and
what we sell ourselves on is.
Is again, our backgroundin agriculture runs deep.
We are people who, who get it and,and understand the challenges on the
farm and, and so it, I think thatcomes through on the capital side.
(25:34):
I believe it does.
Mm-hmm.
I also think it comes through on thefarm side, like when we're on the farm
and, and are talking to operators.
You know, I'm not, I'm not farmingevery day, obviously, but because
of my background, I think there'sa comfort level that, that I can,
that, that we can communicate wellto each other, and there's value
in that on the farm level itself.
So.
So we have these kind of conversationsas professors with people across
(25:56):
the ag sector all the time.
We've actually had conversationswith you guys about these same things
already without the microphones.
And so when we're trying to understandhow the economy works and we ask a
series of questions, so what do you do?
Right?
What are you, what are you tryingto, what are your objectives?
Whatcha trying to achieve?
And you kind of touched on those.
The other thing we think about,we're sort of building a model,
is like what are the constraints?
(26:17):
Like what are the things thatprevent you from doing the best.
Now, obviously, you know, economistswould say we're always constrained, all
of us by some sort of budget constraint.
We all have a budget constraint.
We're also always constrained with time.
Yeah.
Are there any other like relevantconstraints that you think that you
sort of hit on in your day-to-day job?
Constraints to?
(26:37):
For what exactly?
To to, to reach your objectives?
Yeah.
Probably the, again, we've, we'vetouched on this a little bit, but,
but farmland is a niche asset class.
Mm-hmm.
And, and.
Your question really hit on that you'renot selling many times, we're not
selling ourselves just as managers.
We're selling the benefit offarmland as an asset class.
Mm-hmm.
And, and sometimes how to evenappropriately view that asset class.
(27:01):
I think I mentioned earlier,the farmland can be in a bucket
called alternative investments.
Well, also in that bucket isprivate equity is considered
an alternative investment.
Well.
If you're comparing returns from farmlandto private equity, w we're gonna lose,
but, but understanding the true riskof farmland as an investment class
versus the risk of, of private equity.
(27:23):
So, so private equity being like.
I could invest in someone'sstartup that they've got like
an app that they're gonna do or
that, that, yes.
Or some other sort of company or space.
Yep.
Any, any privately held businessthat wants capital, Hey, we,
we, they would sell a portionof ownership in that business.
Right.
And, and the privateequity can help mm-hmm.
Fund it to help itachieve its growth goals.
(27:46):
There's a, there's inherent risk in that.
Oh, yeah.
Yeah.
Much more than, than owning a pieceof real estate and, and, and farmland.
And so, trying to educateon the differences of that.
And that's just one example, but, but,and, and how we compare to bonds and,
and why it's a good thing to have aportion of your portfolio in farmland.
How it fits in your, your portfolio Sure.
(28:08):
And how you should think aboutthere, there is an education to that.
And again, it's simply because it's,it's in my mind, it's simply because
it's such a niche asset class that,that really probably, I would say
the, the early nineties are reallywhen you started seeing investment
ramp up in this asset class.
So if I was thinking about this interms of building a model, what I
would think of that is like one ofthe constraints is your willingness.
(28:32):
So potential clients'willingness or understanding
of investing into this space?
Is that a way to sortof characterize that?
Yeah.
A it's it's raising capital.
Yeah, yeah, yeah.
Right.
Yep,
yep.
Yeah.
It's, it's simply,
Well, and it's, it's tricky tooin people that raise capital to
sort of know what you're getting.
Right.
In like Yeah.
Particularly like, you know, you mentionedyou've been in this space for a long
(28:55):
time, so there's now a track recordof here's what we're we do and here's
how we, yeah, here's how we operate.
But if we went back, had thisconversation 10 years ago.
It's a lot less much of a trackrecord, more of a vision, right?
That's exactly right.
Yeah.
Well, it's kind of like we're.
Nerd alert.
Yes.
Trying to move the demand curve as opposedto just move on the demand curve, right?
(29:19):
Yeah, yeah.
Like you're trying to build, you'retrying to shift that demand curve, right?
Using information to say like,Hey, this matters, this, this
could be something part of yourasset, part of your portfolio.
Yeah, and, and you know, wedo stress that we, we look at
farmland as a part of a portfolio.
This is not the, thedriver of your portfolio.
Again,
Not for me, man.
I'm doubling down.
After this conversation,
(29:40):
After this, i'm, yeah.
Put it all on farmland.
Yeah, that, there you go.
I guess we're doing all right here.
Yeah.
One at a time.
One at a time.
You got Chad.
The, the, that, that's a bigpart of it though, is, is just,
again, it's, it's a niche class.
Why does it make sense in your portfolio?
And, and really again, we lookas a part, we look as a good
diversification in the portfolio.
(30:01):
Less a driver of yourportfolio, if that makes sense.
So, so then thinking of this economythen, are you more constraint?
Do, do you see more potentialinvestments than you're actually able
to pursue, if that makes sense, right?
So if, if you're constrained bylike a budget constraint, right?
Mm-hmm.
Then what we often end up observingis people that say like, well,
(30:22):
I would've done this had Ihad additional capital, right?
Mm-hmm.
Um.
Like, is that, is thatstill a space out there?
Yeah, I, you know, we're, we'realways happy to accept more
capital, but I wouldn't call uscapital constrained right now.
It's just finding the rightinvestment opportunities.
Okay.
So its, it's a pricing now.
It's also, it's also the limited supply.
Yeah, limited supply.
And, and look, we're not, we alwayssay this, we believe, we don't set
(30:46):
any county records with, with pricing.
Right?
Sure.
Our, our, our pricing of an ofopportunity is, is based on mathematics
and finance and less emotion, right?
And so when you pull thatout there, we really.
I don't believe we competewith farmers very often.
If, if it's, if it's a piece of groundthat's next to 'em and they're gonna
own it, that they, they will own it andwe won't be able to compete on price.
(31:09):
So.
Well, I think that's one ofthe things I wanted to ask.
'cause that's, that's a sensitivity right.
In the farm community.
Absolutely.
And you guys have touched on this, likeyou, you're, you're looking for long-term
sort of relationships with farmers.
But there's a sensitivity to thisinvestors coming into communities, right?
That this is the big bad,sort of like they're coming in
and taking away opportunity.
And you're saying we're, we're notstanding at that public auction
(31:30):
sticking the paddle up 10 more times.
Yeah.
We, we absolutely.
I mean, just to hit on that exampledirectly, we, we have bought stuff at
auctions, but it's few and far between.
And frankly, we, we, we try to avoid 'em.
Sure.
And so.
Those aren't areas where we go, we tryto find the, the niche opportunities
that, that, again, from a mathematicsstandpoint work for our clients.
(31:50):
And, and so that's our focus.
That that is a big constraintthough, because those opportunities
are few and far between.
And that's again why we tryto go and find these networks
that can help us dig those out.
And, and it kind of goes back fullcircle to the raising of capital.
Again, we're, we're, we're always in thebusiness of, of bringing a additional
capital to our firm that wants to investin farmland, but we're also sensitive
(32:15):
to the fact that we don't wanna be outthere buying anything and everything.
Right, right.
We're, we're, if you start doingthat, I think you lose your, your.
I mean, I, I fear we lose our sense ofself of, of how we want to go about this.
How we wanna be a prudentinvestor in this space.
So it's, you don't wannaflood the marketplace.
Again, this is a relative to otherasset classes, this is a small,
(32:38):
this is a small asset class.
Yeah.
And then the other one that we alwayssort of ask, right, is like, is
there any, has there been some recentchanges that maybe have shifted how
you view your role in the economy?
Or things that maybe youanticipate being on the horizon?
Right?
So for example, it'd be impossible tohave a discussion now, this spring,
(33:00):
and not talk about sort of like traderelationships and trade partners.
Has something changed there?
Yes, yes, yes.
Or at least there, there's
Something changed duringthis conversation.
Yeah,
Yeah.
Probably literal, literally getan alert literally until we,
There's gonna be a relaxing.
Okay.
So yeah.
But there is a threat ofpotential trade relationships.
We, but we also just wentthrough Covid, right?
Where our whole international shippingstuff has been adjusting how they
(33:21):
think about things and markets and, butlike, or, or just policies in general.
I, I know that.
You know, as a financialinvestment firm, you also have
regulatory requirements of things.
Mm-hmm That you, activitiesyou can and can't do, or ways
you can frame your poten.
Like you can't take everythingthat would potentially pop up.
Right.
(33:41):
So like has there been any sort ofmajor changes in the last, since
you've been in this profession thathave changed how you think about
your business or do your business?
Or things that you think like,this is what I'm watching 'cause
I think this could change next.
Probably the, there's a coupledifferent paths we could go down here.
I, I. I'd start with and, and Ifeel like we've, we've been good
(34:04):
at this, you know, scrutinizingspecifically out west, water resources.
And, and understanding, hey, youknow, California is a big one.
They, in 2014, they, they enacted theSustainable Groundwater Management Act.
Did I say that correctly?
That's amazing.
Sigma's.
Yeah.
I think they call it Sigma.
I can't believe I got that out smoothly.
They call it Sigma.
Yeah.
(34:24):
SGMA.
My kids would love that.
But trying to stay on top of thosewater regulations is important, right?
Specifically for the, those,as those farmland out there is
reliant on, on consistent and,and sustainable water resources.
And so understanding that and, and puttingan emphasis on, on understanding that
and what, what the future might entailfor specific properties and its specific
(34:47):
water rights is absolutely important.
And, and that's been a evolvingregulation as as we go forward and
I think it will continue to evolve.
Probably the other one that, that we'venoticed, again over my 10 to 12 years
in this space, is sustainability is afactor from the, the capital providers.
(35:08):
Like, it's not, I, I don't wannasay it's, you know, there's a
balance there, but people wannaunderstand what's going on a farm.
You know, part of, part of the attractionof, of farmland as an asset class is
it's a tangible asset and it has directeffect effects on the environment
and humanity through, through theproduction of food, fuel, and fiber.
Right?
So.
Telling.
I,
(35:29):
I think we're lucky in this industry.
I think everybody in this roomwould agree that, that we've made an
incredible strides in how we operatefarmland and, and, and produce
that food, food, fuel, and fiber.
I, I hate saying this 'cause this getssaid too much in agriculture, but,
but part of our job is, is tellingthat story of how, how much we've
changed and, and what our tenantsspecifically are doing that's really
(35:51):
well, doing really well on our farm,on our clients' farms, I should say.
But also, you know.
Uh, probably looking into thefuture, how do we continue to
push that narrative forward?
Let's not stop on theimprovements we've had now.
And, and we do that aalongside our operators.
I, I don't, we don'treally push anything down.
(36:11):
I certainly don't feel it's,it's continual growth by them.
Tillage practice is a big one, right?
Mm-hmm.
I, I can remember having, havingmultiple moldboard plows as a kid.
Those are as much scrap metal asthey are anything at this point.
So we, we, we continueto push that envelope.
Where there's a lot of no-till going downand even the tillage that does happen,
it's vertical tillage or strip tilling.
(36:32):
And it's, it's just has a lotless disturbance on the soil.
People would be surprised how muchof that is actually going on on
farmlands, on farms right now versuswhat's kind of stated out there?
I think one of the ways our, likeprofessional lives probably overlap as
professors and, and people that work inthis investment space is like we spend
(36:53):
about as much time talking to people sortof of core and inside the ag sector, as we
do people completely outside of it, right?
Mm-hmm.
And so some of that times, like, thereare people that are still amazed at
like the technology use of farms.
Yeah.
Right?
And they, and they sort of think aboutlike Tom Joe or their grandpas or like,
you know, like a farm all tractor beinga huge innovation sort of thing, right?
(37:14):
Yeah.
And then you get intonew pair of overalls.
Yeah.
And you get into the world of like,no, we're talking about robots
and we're talking about drones.
And right, like, I, I,I think sort of the.
In, in some ways there, there are,my perception, people that are sort
of resistance to sort of tell thatlike, no, we're a high tech investment
like, or high tech, you know,industry doing these sort of things.
(37:37):
'Cause there are times it's beneficialto sort of point to like, no, we're
just like people with a dream, youknow, living on the soil like a,
like a, like a hundred years ago,but like they're sort of both true.
Mm-hmm.
Right.
And like how you can communicate.
Sometimes it's a matter of taking that,that group that's sort of from the
outside and exposing them to the inside.
But also the people that are like sortof inside of exposing to the outside
like, well, no, here's also whattheir constrain, this is like what
(38:00):
we asked these economists questions.
Like, here's what they're tryingto achieve, here's what their
constraints are, and you can kindof understand a little bit more
how these things fit together.
Right.
Yeah, that's a really good example.
I, I do think, again, that's whereI hope our group brings value
to both sides of the equation.
Even our tenant farmers, I, I, I thinkthe fact we talk about what, what people
who are interested in agriculture,'cause they're, they're wanting
(38:21):
to invest in it, but, but probablydon't touch it and feel it every day.
Right?
They, they understanding the questionsthat, that we are, are getting asked
and, and communicating those and tryingto help develop the right response.
And, and, and I think there's valueto them to, to see, hey, where, where,
where's this world going from a capitalperspective where, where, where,
(38:42):
what's, what's interesting to them?
Should I shift how I think about myoperation in this, in this capacity?
You're right.
We probably.
Play a little bit of a similarrole in, in those conversations.
I, I got a question.
'Cause this, this comes up and Iwould, I'm, I've never asked either
of you this, but when Dow spun out,Corteva, there was a lot of conversation
(39:02):
around, there was investors who werewanting more exposure to production ag.
And so it was like, whenthey first started, they
were gonna release the stock.
There was a, this big pop ofinterest in like, how do we gain as
investors to production agriculture.
Do, do you feel like there's also apart of that in your investors that
they, they want to get closer to sortof the farm and, and sort of the, the
(39:27):
market dynamics that happen there?
Or is that really not somethingthat you've encounter?
I think that's an investorby investor basis.
We, one of our, actually our first clientswas a, a state teacher pension fund.
That, that the director ofthat, he loved agriculture.
He would drive up in an,in an rv or no, I'm sorry.
(39:48):
It was a, it was a, it was likea, on the back of a pickup.
But he had a sleeper on the backof the, the camper shell on top
and would come tour the farms.
Seriously.
And, I only use that story becauseI mean, that shows how much he,
like he loved this space, right?
He loved this space, and so I,it's an investor by investor basis.
(40:08):
Okay.
It's like some of them lookat it admittedly as, Hey,
what, what's the returns?
What's the risk?
What's the variabilityin, in these returns?
And, and it's a numbers game.
Sure.
Some of them look at very much as, Hey, I,I love the fact I can touch and feel this.
I love the fact that you can tell me.
How we are improving the environmentthrough, through this asset class.
(40:29):
What's the weirdest crop that you've everhad to evaluate as a potential expansion?
I don't know if it's weirdest,but I'd probably, yeah.
Chestnuts was nuts.
Was a unique one.
Chestnuts?
Huh?.
. Unique.
I've not thought aboutchestnuts as a as a crop.
Well, can you, you, you actuallyexplained to me that you, you eat
chestnuts, like that's what you'resupposed to do with them, right?
(40:51):
Yeah.
And I don't know anybody whoeats chestnut, which is part of
Yeah.
But like that was
Nat King Cole
at least.
At least enjoys the smell ofthem roasting by an open fire.
Yeah.
But he didn't say anybody eating 'em.
So I don't know if he eat that.
That's true.
Did not taste, they taste kindalike a buttered potato, almost.
Like, wait, the butter?
You don't have to put butter on'em to get the butter flavor.
(41:11):
Wow.
It's baked in there.
I love,
I actually, 'cause yeah, we, weexplored this a little bit and so
I went and bought a pack and youcan find 'em in your local grocer.
Oh, you can?
Yes.
Yeah, yeah.
Typically around Christmashigh, and I assume you score,
And I assume you roast themeither by an open fire or
microwave or a
toaster oven
or, or a closed fire.
Oh, okay.
Oh, did you do, yeah.
It wasn't a microwave, right?
It was a toaster oven.
(41:31):
Can you give me like,how large are chestnuts?
Yeah, they, they're bigger than a quarter,probably about smaller than a half dollar.
I'd say, yeah.
Do you eat the whole thing
And is it, is it like one big,
It's like a third of the,
Is like a, is it like a Brazilnut where it's a giant one thing?
Or is it like a walnut wherethere's like pieces within it?
Oh no, it's, it's like
I think you're forcing 'eminto nut category too much.
(41:53):
I know this is turning into a nutpodcast, which didn't, you brought it up.
You introduced the nuts.
Oh.
If you ask follow ups,and now I wanna know.
Okay.
'cause when Pete said theytaste like a buttered potato.
Yeah.
If you'd said like, what'syour favorite food number?
One's bread.
Number two might be buttery potatoes.
They can use chestnut for, like, oneof their big uses is gluten-free flour.
(42:15):
Oh, and what was the other?
Yeah, so it's, it's different from a lotof other nuts that like, it's, it's like a
carbohydrate, I think it's less of an oilthan, than like an almond or something.
How, how did you find them?
I mean, delicious?
I mean, when you say butterpotato, I, I couldn't agree more.
That's what it tastes like.
Yeah.
Wow.
And so it's unlike any net you've had.
Yeah.
And, and if you roast itand it's warm, it's not bad.
(42:36):
I, I didn't mind it.
We like to end with a lightning round.
Okay.
Okay.
So the way a lightning round worksis you have to give quick answers.
You guys are good at giving very long,
Drawn out thought answers.
So we need just a quick one.
Okay.
Okay.
So the first lightning round questionis if you had access to a time machine.
You could only use it for work purposes.
(42:58):
This is not a time machine for leisure.
Mm-hmm.
And it's, you're gonna useit to get better at your job.
When are you going?
I'd probably say early 1900's.
And California.
Oh see, what are you doing?
What are you, what are you doing?
What are you, why are you, why areyou going early 1900's California?
I just wanna see them, you know,hash out all the water rights and
(43:20):
making the world out out there.
Alright.
That exist today.
I hadn't been, be a lot simpler.
I'd go 2002 and the cornbelt and pre RFS standard.
Yeah.
Yeah.
Okay.
Buy a bunch of farmland.
Yeah, yeah, yeah,
Yeah.
Um.
If you had a magic wand, similarlyat your office, you can use for work
(43:41):
and you can use it to gain a piece ofinformation or knowledge that you don't
currently have, what would you use it to?
To learn?
I'd probably, I don't know.
I'd use it just to, yeah, I keep talkingabout water, but like if you could
physically see in the ground exactlyhow everything's actually looking.
(44:02):
I think that'd be really important.
Un underground water vision.
Yeah, yeah, yeah.
That's a good one.
I, I like the, I like the water.
That's, that's good.
You, and I'll say, understand Trump's thepresident Trump's long-term goals here.
Oh yeah.
That's good.
That's,
Yeah.
Just, or just reallyvirtually any politician.
(44:22):
I mean that
No, you're right, you're right.
Trump is the obvious one becauseit, it feels in real time
'cause he is the president.
He's, yeah.
Recently.
Yeah.
But any, that's a good point.
Override, but like.
But if you could just observe truepolitical goals and intentions.
Yeah.
Of any like That's a great magic wand.
You could sell thatone for a lot of money.
Oh yeah.
Oh yeah.
True.
Get outta farmland.
Let's do one more.
The last time you had troublesleeping 'cause you were thinking
(44:46):
about something from work.
What were you thinking about?
Oh, how to start with me?
We're looking at you.
Yeah.
I don't know.
I don't, I'm not very good atpublic speaking, so I'd say the
last time I had to like give apresentation or something, I just
lay awake thinking about it probably.
Mm, okay.
I, you know, probably my, I strugglewith delivering bad news and that
(45:09):
probably is something I, I would,if, if I had to guess the last time
I did it, it'd be something like thatknowing I had some bad news to deliver.
That's good.
That's good.
Oh man.
Hey everybody, this is Chad.
Todd was a little busy, soI'm doing the outro here.
I hope you enjoyed that conversationwe just had with Pete and Kyle.
(45:32):
We did, we learned a lot.
One thing that I really likedis when they talked about.
Farmland investing.
If you enjoyed this podcast, please
like and subscribe and wewill be back in another month
with a new, uh, conversation.
We look forward tohaving you join us then.
Thank you for tuning in.
(00:01):
My name's Todd Kuethe.
I'm a professor here in the Departmentof Agricultural Economics and part of the
Purdue Center for Commercial Agriculture.
I'm joined by my co-host
Chad Fiechter also an Ag Economist here inthe Department of Agricultural Economics.
So we are economists.
We're trying to learn and figureout how the ag economy works.
So we have a series of conversationsin our regular job trying to figure
(00:21):
out, we don't understand thisproblem, how the economy works.
And so we started recording them.
This is our second episode that we'vereleased, so if you're tuning in for
the first time, you can go back andcheck out the one we did with Matt
Erickson, which was outstanding.
We talked about Senate AgCommittee, how that works.
Tell us a little bit who we'remeeting with today, Chad.
Kyle Maple and Pete Drost, they weregrad students in this department and they
(00:44):
now work in the farmland investing spacefor a farmland investment company in
Indiana,
in Indiana, US agriculture.
I've heard you describe ourpodcast, one of you use is
sort of peeking under the hood.
Trying to figure out howthis stuff actually works.
Yep.
And I think the farmland investmentspace, something we hear a lot of
(01:07):
people ask us questions about oryou'll definitely hear opinions about
it, but we think it's like somethingthat we don't totally understand.
Exactly.
We think a lot of people also don'tunderstand, maybe even misunderstand it.
Right.
So Kyle, why don't you introduceyourself to the audience?
Tell us who you are.
Yeah.
Kyle Maple.
I was born in Kokomo, Indiana,raised on a grain farm.
Pete and I work for US Agriculture.
(01:30):
It's a privately held investmentmanagement firm focused on
the farmland asset class.
My role currently is directorof asset management, so oversee
acquisitions and management of thethe properties in our portfolios.
Perfect.
Pete, do you wanna introduce yourself?
Yeah.
Pete Drost.
I grew up on a farm, although.
Not in Indiana.
I was actually born in Canada,lived there till I was about seven,
(01:53):
and then kind of moved everywhere.
Ended up in the Texas panhandlefor a little bit of time,
and then went to Oregon.
I lived on a hay farm out there and thenpicked a college close kind of to Canada.
Ended up at Purdue and then, yeah, asKyle mentioned, worked for US Agriculture.
He's my boss.
I'm an investment analystthat works under him, so.
Perfect.
So for our audience listening athome, it might be helpful for them to
(02:15):
envision a face to put to this voice.
So, which celebrity to both Kyle andPete have people told you, you look like?
I actually have one.
I've, I've had multiplepeople tell me this.
It's mainly happened when I wasan undergrad in the tailgating
fields here at Purdue, so I know.
Yeah.
Uh,
So it has to be true.
Yes.
The main actor in DexterI've been told I look like.
(02:39):
Your tailgating persona looks like Dexter.
That's what I've been told.
Okay.
Alright.
Like see, Pete, whathave, what have you got?
He means business.
That's right there.
That's right.
I've been told lately,Will Ferrell probably.
Okay, I can see that.
Yeah.
Or the guy from Napoleon Dynamite.
The main character there.
Okay.
So if we could get into kind of what isit that you guys do on a day-to-day basis
(03:01):
Basically, so Kyle manages,he's asset manager and under him
there's a bunch of farm managers.
And then those farm managers, they'llcome across various deals and then
I'll be the first point of contact.
So one of my opening tasks, if we'regonna look at a farm to potentially
invest in is I'll get a acre numbers,historical yields a rental figure, and
(03:21):
then I'll kind of do some back of thenapkin math on it to see if we should
entertain making an offer or not.
Then assuming we have a good offer priceand then an LOI will get sent out and then
if that gets accepted, then it'll come.
Whoa.
What is an LOI
Letter of intent.
Okay.
Okay.
And I wanna go, I wanna go back.
So these farm managersare all over the U.S.?
(03:43):
Yeah.
So Kyle was Midwest, all theway down to North Carolina.
And then out west allthe way up to Colorado.
Yep.
And then across the ContinentalDivide, there's another farm manager
who manages all the Pacific Coastassets from Idaho all the way down
to Imperial Valley, California.
And then in the south there's another farmmanager that manages that region as well.
(04:05):
Yeah.
So when you say like they're comingacross deals like this is just
these, they're in the communities and
Yeah.
So,
and they're seeing signs.
What, what, how do you,
A big part of what we do to tryto meet the demands of our clients
is, is find stakeholders that haveaccess to or, or knowledge of local
marketplaces and farmland thatthat could come available for sale.
(04:27):
That's a wide ranging group of people,but we're constantly trying to broaden
our contact base, whether that bebankers, appraisers, real estate
Oh, I see.
agents, farmers, right.
Yeah.
That, that are looking for, for capital.
And so hitting on all those networksand trying to find access to land
that that could become availableand, and hopefully purchased by us
(04:48):
and managed by us going forward.
And then maintaining relationshipswith operators going forward when we
purchase an asset for a client, thosefarm managers, including myself are
tasked with managing those properties.
A lot of times that is through apassive lease, structuring a lease that
works for both sides of the equation.
The farmer, uh, as well as our client.
And, and so it's an ongoing relationship.
(05:10):
We hope it's the start ofa 20, 30 year relationship.
I see.
So, so like when you think aboutthese, these clients, so these
are folks that are looking to getinvestment exposure to the agricultural
sector for some reason, right?
It meets their portfolio needsor investment objectives.
So, thinking about like myself, right?
So I've got a retirement portfolioand I've got a financial manager,
(05:33):
and sometimes we set a goal, right?
If he says like, oh, you shouldbe like putting away this much
money for every time, right?
Or, you know, I've got moremoney than I thought we had.
Like, so we were getting some renovationsin our house and it didn't cost as much.
So I, I'll have more to putin my retirement account.
And so I'll go to him andsay, I've got this much money,
can you help me deploy it?
Right.
So how much is it like people comingto you saying, we've got this much,
(05:56):
we're looking to invest, and thenyou go find those investments?
Versus you see some kind of investmentopportunity and then you go to your
existing clients and say, Hey, if you'reinterested, there's also this opportunity,
or is it, does it work both ways?
Uh, or is it one way or the other?
Primarily it's the first.
We have a director of businessdevelopment named Evan Newton, who's
constantly out there knocking oncapital doors trying to raise capital
(06:18):
that has interest in this marketplace.
And you are correct, Todd.
What they are trying to accomplish istypically it's institutional investors
like a pension fund that we are courtingand they are interested in this space
because it's a great diversification frombonds and equities and, and historically
it's been a great inflation hedge.
It's a capital preservation, right?
(06:39):
It's, and, and, and prettyconsistent returning asset
with a consistent cash flow.
And those are kind of the main driversof why they wanna be in this space.
But we are going andactively seeking them.
And, and a lot of times thoseinstitutional investors, when they
want to change their investmentportfolio, they would have consultants
and they might put out request forproposals of, hey, we, we think it's
(07:01):
time to get into the farmland space.
Let's go out and, and try tosource who are the managers
we want to invest through.
So another thing that's difficult forthe farm audience to think about, and
you know this 'cause you're a farmerand Indiana farm families, like how big.
Like how many outfitsare there like yours?
(07:21):
Or like, is, is there, is there alot of people kind of in this space?
Is it relatively niche andsmall and there's a handful.
Like could we fit 'em in a car, fit'em in a bus, fit 'em on a cruise ship?
Like what's the,
there's different sizes of buses too.
Yeah, that's, I didn'teven think about that.
Yeah.
See this is why Chad's here.
Yeah.
I should say those like littlebuses that like you get at the
(07:41):
airport to take you to the parking.
Yep.
Or like a full size city bus.
Yeah.
Or even one of those doublebuses that hinge, if you know.
Yeah,
Yeah.
No, that's really helpful guys.
See, this is good.
We're all learning today.
Yeah, that's right.
No, I started in this businessin 2011, and I would tell you
that it was a handful back then.
And it has grown.
(08:02):
There are more investmentmanagers in the farmland space.
Now, there are some thatare very specialized.
Meaning they are focused solely on, onsustainability, or even some of them are
focused solely on debt rather than equity.
To date we're an an equity investor,so, so trying to take fee, simple
title into the real estate itself.
(08:23):
So it has grown.
There are quite a bit more, I couldn'tput a number on it, but it, it's
been a space that has expanded.
Competition's expanded.
But, but not, but, but it's not likewe're gonna run into them all the time.
No, no, no.
It's not, it's not like a, like a
relative to equities or,or something like that.
Yeah, yeah.
Like it's, it's, we are a tinyinvestment class, and so the
(08:44):
amount of management firms inthis space align with that, right?
Yeah.
So, so more bus than cruise ship.
That's a good way to put it.
So short bus is not what we're saying?
Yeah.
Oh, man.
That's a, that's loaded.
It might be bus, what yousaid was It's a hinged bus.
It's like, it's a double,but not quite a double.
Yeah.
Yeah.
No, we, we were, we were avan and we might be a bus now.
Yeah.
I think that sounds right.
(09:04):
That sounds good.
Good.
All right.
Kyle, what's your day-to-day tasks?
Yeah, like Pete said, I actually stillto date do a lot of farm management, so
I'm out on the farms speaking with ourtenants and negotiating leases with them.
And then still sourcing newacquisition opportunities.
So again, trying to hit on a varietyof networks that would've access to
(09:26):
farmland and finding deals that, thatwould make sense for our, our clients.
On top of that, as my current role,I, I am also helping with acquisition
opportunities in other regions fromthe other managers across the U.S.
and so if we've got a opportunityin Idaho, I'm evaluating that.
Asking questions to make sure we'rethinking through all the variables
(09:49):
that, that try to, again, reduce riskfor our clients and, and, and the
investment of that specific asset.
So right now it's touching a lotof different real estate across
the country and supporting theother departments in our business.
So does that, does that.
Also include travel?
Like are you, are you physicallygoing to these properties to see them?
(10:09):
Yeah.
Like how, how often are you
Yeah
on the road?
Yeah.
I, I'd say at a minimumonce a month and probably
Okay.
more when you count just driving andseeing our farms here in the Midwest, so.
Okay.
It's a decent amount of travel.
Mm-hmm.
Luckily, probably not as much asother industries, but it's also good.
Right.
The only way you're gonna learn applesin Washington is to go out and see
what the bottlenecks are, see whatthe markets and the challenges are
(10:31):
of getting those apples from thefield to the, the packing facility.
So,
Yeah, 'cause the, the propertiesyou've purchased could potentially
be like long term crops as opposedto the traditional row crops that
we think about in the Midwest.
Yeah, we, we would segregate thoseas permanent crops and annual crops.
And in permanent crops,you're absolutely right.
You're talking trees, bushes, vines, and,and hey, there's a lot of value in those
(10:56):
assets above the ground, let alone thecost and and value of the dirt itself.
Mm-hmm.
So we do look at those differently.
In fact, many times, not all thetime, we operate 'em differently.
We will what we call directly farm, it'sreally, it's hiring an onsite manager
to take day to day operating decisions.
Oh, I see.
And we would own the crop, we wouldown the inputs going into that crop.
(11:18):
For the row crop land, corn, soybean,even, you know, some of those veg crops.
We have some farms up inMichigan, for example, that would
grow a variety of vegetables.
We're gonna passively leases, we'regonna find a high quality local operator,
like I said, hopefully, and developinga long term relationship where they're
gonna be on it 20, 30 years and, andconstantly just try to keep up with market
(11:40):
rental rates for that, for that land.
So, Pete, what about youas the more junior person?
How much time do you spend on the road?
More or less than Kyle?
Less so
May.
Maybe we should step back one step,which is, so Chad and I also, as
professors, we work with a variety ofstudents, undergrads, grad students.
Tell us a little about yourtraining that you did before this.
(12:02):
If I had a college sophomore thatcomes to me and says, man, this
farmland investment space is awesome.
I wanna work in there, what arethe activities that we should
tell those students to do?
Or skills they should pick up sothat they would be attractive to
you and other firms like yours.
Really, we, we are financially, you know,finance is a major part of what we do.
(12:23):
Farmland sounds like a pretty easy thingwhen you just buy and, and lease it.
But, you know, we work with a,what I'd call, uh, sophisticated
investors and they wanna understandwhat that asset class does relative
to some of their other investments.
So we do discount cashflow models to see what we.
Think that asset will return, calculatingpresent values and IRs and that goes all
(12:45):
the way down from just buying the farminitially to capital expenditure projects
that we wanna see done on the farm.
So a big part of that is, is you need tohave some understanding of, of finance.
I, I think it's 4 24 here inthe ag econ department, if I
remember right, is the, the class.
But Pete, what did Imiss there in your mind?
No.
Yeah, I'd say the financepart of it is, is huge.
(13:05):
And knowing those timevalue and money equations.
And then if you're gonna give astudent advice for once they're done,
their bachelor's degree and they'reconsidering going for a master's or
what they should do to be attractiveto an investment management company.
I'd say one thing I didn't learnabout until, I guess after I
started at US Ag was the CFA.
And it's, it's, it's anaccreditation program.
(13:28):
They have, I think it's like two or threeyears long, and it's just strictly on like
finance and modeling and time value money.
And they get into some theory, butnothing like you'd get into like
in a traditional master's program.
But yeah, so
My understanding is it's a little bitmore like pragmatic or like, like it's
(13:50):
more about like, you know, here's howyou buy bonds and here's how bonds work
and how, here's how you would sell bonds.
As opposed to like, theoretically,where do interest rates come
from or something, right?
Yeah.
So a little bit more on the ground.
I, anyway.
I, I too need to lookinto it a little bit.
No, I, I think you're right though.
I would always equate it to givea, a master's in MBA, for example,
(14:13):
in finance is probably somethingthat's gonna touch on a hundred
square foot, but an inch deep.
And this is, you know, a hundredfeet, a hundred inches deep and
one square foot is what CFA is.
I said that terribly, but I think
No, no, no.
I think you said that great.
Yeah.
And there, there's other tools like that.
There's also a, a charteredalternative investment analyst,
and, and that is very similar.
It's focused on, uh, it's.
(14:34):
It's a little bit of a shorter program,but focused on alternative investment
buckets and then farmland actually isincluded as an alternative investment.
So there are other tools tohelp you dig into and, and like
Pete said, a master's program.
Pete has his master's inagricultural economics.
I did the MS MBA program, the jointprogram with Indiana University
and Purdue University here.
(14:55):
Through the ag econ department.
So there's other ways to get training.
The only thing we didn't touch on that Ido think's important, and it's important
in anything you're gonna do from acareer perspective is, is communication.
I think it's, it's imperative thatwe are good communicators to both our
clients and to our operators on the farm.
And, and the only happens by, byspeaking with people, challenging
(15:17):
yourself to get up and, and do podcasts,whether you're good at 'em or not.
Okay.
That's us.
Chad, sorry about us.
He said not good Adam.
That'd be us.
Yeah.
What else should we ask?
Okay, so one of the questions I have isrelated to the job is like what surprised
you the most in kind of the roles thatyou have that you, you didn't expect?
(15:37):
Let's start with Pete.
I've been doing this toolong for that, that question
He has.
He's never been surprised.
He's never been, actually, thatdoesn't shock me outta you.
One thing that surprisedme, I'd say probably.
Well, I had really no exposure topermanent crops, but just the timelines
that are associated with when people getpaid on those and sort the cycles that
(15:58):
farmers deal with in that region of the,
So I too have no clueabout permanent crop.
W give me, can gimme likea concrete example of one.
So, like for example, like I didn'tknow that Apple's stored so long in
like controlled atmospheric storage.
Wait, how, how long do they store?
I don't, like, literally I am clueless.
Like, I think it's, I thinkit's like 12 to 18 months.
Oh wow.
In storage.
(16:18):
So like,
So when I'm buying an apple today,it might be like, it might last year,
might even been picked last year.
Yeah.
Wow.
So like, and all that stuff, youknow, then that affects how soon a,
you know, a farmer gets paid and thenyou think about like, you know, if
you're not gonna get paid and youknow, until next year, how do you.
And you had, you know, consecutiveyears of, you know, bad prices.
(16:39):
How does that impact yourability to get financing?
And then not only that, but just likethose crops that you know, aren't,
that don't have like a futures market.
Mm. You know?
Getting good price data.
If you're just entering a space,it's kind of hard to do, like
if, if you're not already there,
When you're putting together yourinitial analysis about whether
or not we should invest here.
Yeah.
Part of that is prices.
(16:59):
Right,
Right.
And then also what could youexpect to get from your yield.
Right.
Right.
And then two, like in permanentcrops is just like, like how variety
dependent a lot of stuff is too.
Like especially in apples and even likein, in blueberries and, and just, and
it's all prices and stuff that you, it.
Initially would be hard tocome by if you're not in the
industry, which really, you know.
(17:20):
Yeah, it really makes the, you know, theanalysis part of entering something like
that a little bit more difficult than
Do, do you have a pro tip of likea kind of apple, I should be eating
A kind of apple that you should be eating
Because this is a i I,
What's our greatest acreage?
You're like cosmic crisp.
I know.
So I've actually beendoing the Cosmic Crisp.
They're pretty good.
A good apple.
(17:40):
Yeah.
No, a buddy of mine,we had this discussion.
I was at a bachelor party.
This tells you like middleaged bachelor party.
Your talking apples.
No, the question was, what is the thingthat you spend a lot more than like
the regular, like the low, like Yeah.
There are things that we buy cheap andthere's things that we splash money on.
Right?
Yeah.
And it's like what is the thing thatyou would, would be the last thing you
would give up spending extra money on?
(18:02):
Yeah.
Great.
The elitist professor justsaid, splash money on it.
And I was worried about alienating people
And one of the guys at thebachelor party said, apples.
And I was like, I never, he's like,he's like cosmic crisp apples.
He's like, if it's cost more, I'mstill gonna buy 'em no matter what.
Like that's the, that's my jam.
And I was like, I've alwaysbeen a honey crisp guy.
(18:22):
And so he got me to convinced.
Switch.
But, but this is, thisis my, mine was coffee.
Just to let you we're not splashingmoney on like I'd get a better, I'm
like, I'm always gonna have the best.
Well we've had this discussion'cause mine is bread.
Yes.
Yours is bread.
Bread.
Oh.
Never guessed bread.
Yeah, no.
The thing about bread, Chad convincedme, is it's a way to have something
luxurious in your meal that's cheap.
So like.
(18:42):
Yep.
If you buy the mostexpensive, best bread, yeah.
That's still cheaper per like mouthfulthan doing the same thing with steak.
Yeah,
But I do like steak more than bread.
No.
So I'm not, I like bread more than steak.
I'm not disagreeing with you, but I thinkthat the thing is, is I love sandwiches.
So if you up the bread game, youcan take a, a mediocre sandwich to
(19:04):
a great sandwich with just bread.
Yes.
Yeah, I agree with that.
Agree or disagree?
Well, I'll have to give it a shot.
I'm, I'm pretty, pretty cheap on my bread.
I think.
See, we're already changingthe way people behave.
Yeah.
This is great.
This is really, okay.
Wait a second.
I wanna ask the Apple questionbecause like we've had, Pete, you and
I have had discussions about this,that, but those apples as we get
(19:24):
new varieties of apples and you getlots of investment in those apples.
Like Honey crisps are a lotcheaper today than they used to be.
Mm-hmm.
Right when they first came out.
Because we have so manyacres in Honey Crisp.
Are we seeing the same thing withlike cosmic crisp, like as more
cosmic crisps like, or how do they.
Control sort of thesupply of those apples.
(19:45):
Yeah, that's the, that's the hard partis that, 'cause it's such a long lived
asset that you know it, you know, onceyou have that oversupply problem, you've
already put so much money into gettingthis tree in the ground and producing and
all those years of non-productive, youknow, just dumping expenses into 'em and
then all of a sudden if everybody did thesame thing then, you know, it's, it's a
big deal to all of a sudden just rip thatout and, you know, put another variety in.
(20:07):
So there are some varieties.
Where those, those you know, rightsof who can plant what are more
controlled because of what's happened.
Okay.
Oh, there's like licensing or something?
Yeah, but with those, I mean,there's obviously extra costs, like
the people who control whether ornot you can plant those, you have
to pay them, you know, royalties.
Big apple.
Big apple.
Yeah.
When you think about the work that youdo and why people work with you, are you
(20:31):
marketing farmland to them as an asset?
Or are you marketing yourservices as the asset manager?
Oh, I like that.
Does that question make sense?
You know, I, I do think Iunderstand the question.
I I'm even gonna break itup even further, right?
Wow.
Yeah, yeah.
Easy, easy, man.
This is why we get pro here.
There's a whiteboard behind us.
(20:51):
Do we need, do you wanna marker?
Well, I do have a short term memoryissue, so maybe the... really
you're talking about two different.
You know, as, as, as we look atourselves as a firm, we're certainly
trying to sell our services and theasset class to capital of why it would
make sense in a portfolio and why wethink we're, you know, the standard
(21:12):
in, in management in this asset class.
But at the same time.
We're trying to sell ourvalue to the farmers, right?
Like, Hey, why, why are wea good resource for you?
Why, why should you consider usbeing a partner in your operation?
So I I,
Wait a second.
So you're saying these are thepeople who are gonna operate.
(21:33):
The assets that you buy.
Yeah.
These are your partners.
So these are, these are the tenants.
Yeah.
Yeah.
And you are saying you areconvincing them that you are a good
Look.
If we have a thousand acrehigh quality farm, it doesn't
take a lot convincing, right?
Sure.
Like, hey, we, we get people knocking onour doors wanting to farm that, but like
Sure.
At the same time, if we have farmerswho wanna free up working capital or
(21:56):
want to 10 31 into a, a, a piece ofground that sits right behind their
shop, you know, wanna pay off somedebt, just get in a better position.
We, we, we've done structures whereit's a sale lease back where we can,
yeah.
Okay.
Purchase the ground from them.
Yep.
And, and obviously enter a a, a leasewhere both parties feel comfortable
about the terms, feel comfortableabout establishing a relationship Yeah.
(22:17):
That, that we can foreseegoing into the future.
So in that scenario mm-hmm.
There is a bit of a sale of hey,here's why we could be valuable
to you in that arrangement.
Right.
And so, yeah, it's probablya little bit less when we are
bring, we have the land already.
We control a lot of farmerslook and say, Hey, I'm.
One way to grow my operationis to farm more acres.
Right.
And so I need to understand, I,I need to get to know those guys.
(22:40):
Yeah.
But at the same time, we, we can be analternative capital provider to farmers
outside of the traditional debt path.
So, so like if I own a farm
Yeah.
And I'm operating and I say like,you know, I want to pay off some debt
or maybe dial back or something, orchange something about my structure,
then I could work with you.
(23:01):
You would buy that farm from me.
I would lease the access backto farm for some amount of time.
Yep.
Would agree to.
Yep.
Yeah.
Okay.
And all that would be verymuch negotiable, right?
Yeah.
In that situation, the farmer ownsthe land, we're gonna come to him,
kind of, You're selling arms open.
Yeah.
Hey, hey, here's how we approach it.
We'll, we'll, I, I feel reallyconfident saying, we'll be very
(23:21):
transparent of what's important tous and, and how we want to establish
the start of this relationship.
And again, we're firm believers in,in trying to make this a long-term
relationship between us and a, and thefarmer, we think that that provides
aligned incentives to, to improvethe land and, and not make short-term
decisions to just, you know, get ahigher cash flow from that property.
(23:43):
So,
Okay.
Great answer.
So what, what would make the servicesthat you provide in this space successful?
Is it the knowledge of sort of farmingand you can communicate that to these
investors who are so far, like whyis an investor needing services?
(24:04):
Right?
This isn't, this isn't meputting you on the spot.
I'm assuming that there is a value, right?
What is that value that you bring?
Yeah.
Look, we mentioned it earlier.
Farmland as an asset class relativeto other asset classes is tiny.
It's not something that peopleare well versed in outside of, if
you're, you've, you've lived, livedin this industry, this world, right?
(24:26):
And so a big part of that is they wantto, capital wants to find people who
does truly understand that asset class.
What are the inherentrisks of that asset class?
Sure.
How do you develop a portfoliowhere, where we are going to get
that consistent cash flow returnthat, that preservation of capital
and capital growth at the same time.
Right.
That's a huge thesisin in owning farmland.
(24:48):
And so they would hire a group likeus because Yeah, we think two things.
We think we understand howto diversify a portfolio.
Mm-hmm.
Within an investment mandate.
Right.
So within a unique assetclass that's very small.
Yeah.
You're saying you can evendiversify a portfolio of farmland.
We, we certainly try to, andthat's done geographically.
That's done through crop type.
(25:09):
That's even done through operatingstructure lease type right
there, that you can get somediversification benefits from that.
And so that, that's how we go about.
And the, the second thing thatwe're really proud of and, and
what we sell ourselves on is.
Is again, our backgroundin agriculture runs deep.
We are people who, who get it and,and understand the challenges on the
farm and, and so it, I think thatcomes through on the capital side.
(25:34):
I believe it does.
Mm-hmm.
I also think it comes through on thefarm side, like when we're on the farm
and, and are talking to operators.
You know, I'm not, I'm not farmingevery day, obviously, but because
of my background, I think there'sa comfort level that, that I can,
that, that we can communicate wellto each other, and there's value
in that on the farm level itself.
So.
So we have these kind of conversationsas professors with people across
(25:56):
the ag sector all the time.
We've actually had conversationswith you guys about these same things
already without the microphones.
And so when we're trying to understandhow the economy works and we ask a
series of questions, so what do you do?
Right?
What are you, what are you tryingto, what are your objectives?
Whatcha trying to achieve?
And you kind of touched on those.
The other thing we think about,we're sort of building a model,
is like what are the constraints?
(26:17):
Like what are the things thatprevent you from doing the best.
Now, obviously, you know, economistswould say we're always constrained, all
of us by some sort of budget constraint.
We all have a budget constraint.
We're also always constrained with time.
Yeah.
Are there any other like relevantconstraints that you think that you
sort of hit on in your day-to-day job?
Constraints to?
(26:37):
For what exactly?
To to, to reach your objectives?
Yeah.
Probably the, again, we've, we'vetouched on this a little bit, but,
but farmland is a niche asset class.
Mm-hmm.
And, and.
Your question really hit on that you'renot selling many times, we're not
selling ourselves just as managers.
We're selling the benefit offarmland as an asset class.
Mm-hmm.
And, and sometimes how to evenappropriately view that asset class.
(27:01):
I think I mentioned earlier,the farmland can be in a bucket
called alternative investments.
Well, also in that bucket isprivate equity is considered
an alternative investment.
Well.
If you're comparing returns from farmlandto private equity, w we're gonna lose,
but, but understanding the true riskof farmland as an investment class
versus the risk of, of private equity.
(27:23):
So, so private equity being like.
I could invest in someone'sstartup that they've got like
an app that they're gonna do or
that, that, yes.
Or some other sort of company or space.
Yep.
Any, any privately held businessthat wants capital, Hey, we,
we, they would sell a portionof ownership in that business.
Right.
And, and the privateequity can help mm-hmm.
Fund it to help itachieve its growth goals.
(27:46):
There's a, there's inherent risk in that.
Oh, yeah.
Yeah.
Much more than, than owning a pieceof real estate and, and, and farmland.
And so, trying to educateon the differences of that.
And that's just one example, but, but,and, and how we compare to bonds and,
and why it's a good thing to have aportion of your portfolio in farmland.
How it fits in your, your portfolio Sure.
(28:08):
And how you should think aboutthere, there is an education to that.
And again, it's simply because it's,it's in my mind, it's simply because
it's such a niche asset class that,that really probably, I would say
the, the early nineties are reallywhen you started seeing investment
ramp up in this asset class.
So if I was thinking about this interms of building a model, what I
would think of that is like one ofthe constraints is your willingness.
(28:32):
So potential clients'willingness or understanding
of investing into this space?
Is that a way to sortof characterize that?
Yeah.
A it's it's raising capital.
Yeah, yeah, yeah.
Right.
Yep,
yep.
Yeah.
It's, it's simply,
Well, and it's, it's tricky tooin people that raise capital to
sort of know what you're getting.
Right.
In like Yeah.
Particularly like, you know, you mentionedyou've been in this space for a long
(28:55):
time, so there's now a track recordof here's what we're we do and here's
how we, yeah, here's how we operate.
But if we went back, had thisconversation 10 years ago.
It's a lot less much of a trackrecord, more of a vision, right?
That's exactly right.
Yeah.
Well, it's kind of like we're.
Nerd alert.
Yes.
Trying to move the demand curve as opposedto just move on the demand curve, right?
(29:19):
Yeah, yeah.
Like you're trying to build, you'retrying to shift that demand curve, right?
Using information to say like,Hey, this matters, this, this
could be something part of yourasset, part of your portfolio.
Yeah, and, and you know, wedo stress that we, we look at
farmland as a part of a portfolio.
This is not the, thedriver of your portfolio.
Again,
Not for me, man.
I'm doubling down.
After this conversation,
(29:40):
After this, i'm, yeah.
Put it all on farmland.
Yeah, that, there you go.
I guess we're doing all right here.
Yeah.
One at a time.
One at a time.
You got Chad.
The, the, that, that's a bigpart of it though, is, is just,
again, it's, it's a niche class.
Why does it make sense in your portfolio?
And, and really again, we lookas a part, we look as a good
diversification in the portfolio.
(30:01):
Less a driver of yourportfolio, if that makes sense.
So, so then thinking of this economythen, are you more constraint?
Do, do you see more potentialinvestments than you're actually able
to pursue, if that makes sense, right?
So if, if you're constrained bylike a budget constraint, right?
Mm-hmm.
Then what we often end up observingis people that say like, well,
(30:22):
I would've done this had Ihad additional capital, right?
Mm-hmm.
Um.
Like, is that, is thatstill a space out there?
Yeah, I, you know, we're, we'realways happy to accept more
capital, but I wouldn't call uscapital constrained right now.
It's just finding the rightinvestment opportunities.
Okay.
So its, it's a pricing now.
It's also, it's also the limited supply.
Yeah, limited supply.
And, and look, we're not, we alwayssay this, we believe, we don't set
(30:46):
any county records with, with pricing.
Right?
Sure.
Our, our, our pricing of an ofopportunity is, is based on mathematics
and finance and less emotion, right?
And so when you pull thatout there, we really.
I don't believe we competewith farmers very often.
If, if it's, if it's a piece of groundthat's next to 'em and they're gonna
own it, that they, they will own it andwe won't be able to compete on price.
(31:09):
So.
Well, I think that's one ofthe things I wanted to ask.
'cause that's, that's a sensitivity right.
In the farm community.
Absolutely.
And you guys have touched on this, likeyou, you're, you're looking for long-term
sort of relationships with farmers.
But there's a sensitivity to thisinvestors coming into communities, right?
That this is the big bad,sort of like they're coming in
and taking away opportunity.
And you're saying we're, we're notstanding at that public auction
(31:30):
sticking the paddle up 10 more times.
Yeah.
We, we absolutely.
I mean, just to hit on that exampledirectly, we, we have bought stuff at
auctions, but it's few and far between.
And frankly, we, we, we try to avoid 'em.
Sure.
And so.
Those aren't areas where we go, we tryto find the, the niche opportunities
that, that, again, from a mathematicsstandpoint work for our clients.
(31:50):
And, and so that's our focus.
That that is a big constraintthough, because those opportunities
are few and far between.
And that's again why we tryto go and find these networks
that can help us dig those out.
And, and it kind of goes back fullcircle to the raising of capital.
Again, we're, we're, we're always in thebusiness of, of bringing a additional
capital to our firm that wants to investin farmland, but we're also sensitive
(32:15):
to the fact that we don't wanna be outthere buying anything and everything.
Right, right.
We're, we're, if you start doingthat, I think you lose your, your.
I mean, I, I fear we lose our sense ofself of, of how we want to go about this.
How we wanna be a prudentinvestor in this space.
So it's, you don't wannaflood the marketplace.
Again, this is a relative to otherasset classes, this is a small,
(32:38):
this is a small asset class.
Yeah.
And then the other one that we alwayssort of ask, right, is like, is
there any, has there been some recentchanges that maybe have shifted how
you view your role in the economy?
Or things that maybe youanticipate being on the horizon?
Right?
So for example, it'd be impossible tohave a discussion now, this spring,
(33:00):
and not talk about sort of like traderelationships and trade partners.
Has something changed there?
Yes, yes, yes.
Or at least there, there's
Something changed duringthis conversation.
Yeah,
Yeah.
Probably literal, literally getan alert literally until we,
There's gonna be a relaxing.
Okay.
So yeah.
But there is a threat ofpotential trade relationships.
We, but we also just wentthrough Covid, right?
Where our whole international shippingstuff has been adjusting how they
(33:21):
think about things and markets and, butlike, or, or just policies in general.
I, I know that.
You know, as a financialinvestment firm, you also have
regulatory requirements of things.
Mm-hmm That you, activitiesyou can and can't do, or ways
you can frame your poten.
Like you can't take everythingthat would potentially pop up.
Right.
(33:41):
So like has there been any sort ofmajor changes in the last, since
you've been in this profession thathave changed how you think about
your business or do your business?
Or things that you think like,this is what I'm watching 'cause
I think this could change next.
Probably the, there's a coupledifferent paths we could go down here.
I, I. I'd start with and, and Ifeel like we've, we've been good
(34:04):
at this, you know, scrutinizingspecifically out west, water resources.
And, and understanding, hey, youknow, California is a big one.
They, in 2014, they, they enacted theSustainable Groundwater Management Act.
Did I say that correctly?
That's amazing.
Sigma's.
Yeah.
I think they call it Sigma.
I can't believe I got that out smoothly.
They call it Sigma.
Yeah.
(34:24):
SGMA.
My kids would love that.
But trying to stay on top of thosewater regulations is important, right?
Specifically for the, those,as those farmland out there is
reliant on, on consistent and,and sustainable water resources.
And so understanding that and, and puttingan emphasis on, on understanding that
and what, what the future might entailfor specific properties and its specific
(34:47):
water rights is absolutely important.
And, and that's been a evolvingregulation as as we go forward and
I think it will continue to evolve.
Probably the other one that, that we'venoticed, again over my 10 to 12 years
in this space, is sustainability is afactor from the, the capital providers.
(35:08):
Like, it's not, I, I don't wannasay it's, you know, there's a
balance there, but people wannaunderstand what's going on a farm.
You know, part of, part of the attractionof, of farmland as an asset class is
it's a tangible asset and it has directeffect effects on the environment
and humanity through, through theproduction of food, fuel, and fiber.
Right?
So.
Telling.
I,
(35:29):
I think we're lucky in this industry.
I think everybody in this roomwould agree that, that we've made an
incredible strides in how we operatefarmland and, and, and produce
that food, food, fuel, and fiber.
I, I hate saying this 'cause this getssaid too much in agriculture, but,
but part of our job is, is tellingthat story of how, how much we've
changed and, and what our tenantsspecifically are doing that's really
(35:51):
well, doing really well on our farm,on our clients' farms, I should say.
But also, you know.
Uh, probably looking into thefuture, how do we continue to
push that narrative forward?
Let's not stop on theimprovements we've had now.
And, and we do that aalongside our operators.
I, I don't, we don'treally push anything down.
(36:11):
I certainly don't feel it's,it's continual growth by them.
Tillage practice is a big one, right?
Mm-hmm.
I, I can remember having, havingmultiple moldboard plows as a kid.
Those are as much scrap metal asthey are anything at this point.
So we, we, we continueto push that envelope.
Where there's a lot of no-till going downand even the tillage that does happen,
it's vertical tillage or strip tilling.
(36:32):
And it's, it's just has a lotless disturbance on the soil.
People would be surprised how muchof that is actually going on on
farmlands, on farms right now versuswhat's kind of stated out there?
I think one of the ways our, likeprofessional lives probably overlap as
professors and, and people that work inthis investment space is like we spend
(36:53):
about as much time talking to people sortof of core and inside the ag sector, as we
do people completely outside of it, right?
Mm-hmm.
And so some of that times, like, thereare people that are still amazed at
like the technology use of farms.
Yeah.
Right?
And they, and they sort of think aboutlike Tom Joe or their grandpas or like,
you know, like a farm all tractor beinga huge innovation sort of thing, right?
(37:14):
Yeah.
And then you get intonew pair of overalls.
Yeah.
And you get into the world of like,no, we're talking about robots
and we're talking about drones.
And right, like, I, I,I think sort of the.
In, in some ways there, there are,my perception, people that are sort
of resistance to sort of tell thatlike, no, we're a high tech investment
like, or high tech, you know,industry doing these sort of things.
(37:37):
'Cause there are times it's beneficialto sort of point to like, no, we're
just like people with a dream, youknow, living on the soil like a,
like a, like a hundred years ago,but like they're sort of both true.
Mm-hmm.
Right.
And like how you can communicate.
Sometimes it's a matter of taking that,that group that's sort of from the
outside and exposing them to the inside.
But also the people that are like sortof inside of exposing to the outside
like, well, no, here's also whattheir constrain, this is like what
(38:00):
we asked these economists questions.
Like, here's what they're tryingto achieve, here's what their
constraints are, and you can kindof understand a little bit more
how these things fit together.
Right.
Yeah, that's a really good example.
I, I do think, again, that's whereI hope our group brings value
to both sides of the equation.
Even our tenant farmers, I, I, I thinkthe fact we talk about what, what people
who are interested in agriculture,'cause they're, they're wanting
(38:21):
to invest in it, but, but probablydon't touch it and feel it every day.
Right?
They, they understanding the questionsthat, that we are, are getting asked
and, and communicating those and tryingto help develop the right response.
And, and, and I think there's valueto them to, to see, hey, where, where,
where's this world going from a capitalperspective where, where, where,
(38:42):
what's, what's interesting to them?
Should I shift how I think about myoperation in this, in this capacity?
You're right.
We probably.
Play a little bit of a similarrole in, in those conversations.
I, I got a question.
'Cause this, this comes up and Iwould, I'm, I've never asked either
of you this, but when Dow spun out,Corteva, there was a lot of conversation
(39:02):
around, there was investors who werewanting more exposure to production ag.
And so it was like, whenthey first started, they
were gonna release the stock.
There was a, this big pop ofinterest in like, how do we gain as
investors to production agriculture.
Do, do you feel like there's also apart of that in your investors that
they, they want to get closer to sortof the farm and, and sort of the, the
(39:27):
market dynamics that happen there?
Or is that really not somethingthat you've encounter?
I think that's an investorby investor basis.
We, one of our, actually our first clientswas a, a state teacher pension fund.
That, that the director ofthat, he loved agriculture.
He would drive up in an,in an rv or no, I'm sorry.
(39:48):
It was a, it was a, it was likea, on the back of a pickup.
But he had a sleeper on the backof the, the camper shell on top
and would come tour the farms.
Seriously.
And, I only use that story becauseI mean, that shows how much he,
like he loved this space, right?
He loved this space, and so I,it's an investor by investor basis.
(40:08):
Okay.
It's like some of them lookat it admittedly as, Hey,
what, what's the returns?
What's the risk?
What's the variabilityin, in these returns?
And, and it's a numbers game.
Sure.
Some of them look at very much as, Hey, I,I love the fact I can touch and feel this.
I love the fact that you can tell me.
How we are improving the environmentthrough, through this asset class.
(40:29):
What's the weirdest crop that you've everhad to evaluate as a potential expansion?
I don't know if it's weirdest,but I'd probably, yeah.
Chestnuts was nuts.
Was a unique one.
Chestnuts?
Huh?.
. Unique.
I've not thought aboutchestnuts as a as a crop.
Well, can you, you, you actuallyexplained to me that you, you eat
chestnuts, like that's what you'resupposed to do with them, right?
(40:51):
Yeah.
And I don't know anybody whoeats chestnut, which is part of
Yeah.
But like that was
Nat King Cole
at least.
At least enjoys the smell ofthem roasting by an open fire.
Yeah.
But he didn't say anybody eating 'em.
So I don't know if he eat that.
That's true.
Did not taste, they taste kindalike a buttered potato, almost.
Like, wait, the butter?
You don't have to put butter on'em to get the butter flavor.
(41:11):
Wow.
It's baked in there.
I love,
I actually, 'cause yeah, we, weexplored this a little bit and so
I went and bought a pack and youcan find 'em in your local grocer.
Oh, you can?
Yes.
Yeah, yeah.
Typically around Christmashigh, and I assume you score,
And I assume you roast themeither by an open fire or
microwave or a
toaster oven
or, or a closed fire.
Oh, okay.
Oh, did you do, yeah.
It wasn't a microwave, right?
It was a toaster oven.
(41:31):
Can you give me like,how large are chestnuts?
Yeah, they, they're bigger than a quarter,probably about smaller than a half dollar.
I'd say, yeah.
Do you eat the whole thing
And is it, is it like one big,
It's like a third of the,
Is like a, is it like a Brazilnut where it's a giant one thing?
Or is it like a walnut wherethere's like pieces within it?
Oh no, it's, it's like
I think you're forcing 'eminto nut category too much.
(41:53):
I know this is turning into a nutpodcast, which didn't, you brought it up.
You introduced the nuts.
Oh.
If you ask follow ups,and now I wanna know.
Okay.
'cause when Pete said theytaste like a buttered potato.
Yeah.
If you'd said like, what'syour favorite food number?
One's bread.
Number two might be buttery potatoes.
They can use chestnut for, like, oneof their big uses is gluten-free flour.
(42:15):
Oh, and what was the other?
Yeah, so it's, it's different from a lotof other nuts that like, it's, it's like a
carbohydrate, I think it's less of an oilthan, than like an almond or something.
How, how did you find them?
I mean, delicious?
I mean, when you say butterpotato, I, I couldn't agree more.
That's what it tastes like.
Yeah.
Wow.
And so it's unlike any net you've had.
Yeah.
And, and if you roast itand it's warm, it's not bad.
(42:36):
I, I didn't mind it.
We like to end with a lightning round.
Okay.
Okay.
So the way a lightning round worksis you have to give quick answers.
You guys are good at giving very long,
Drawn out thought answers.
So we need just a quick one.
Okay.
Okay.
So the first lightning round questionis if you had access to a time machine.
You could only use it for work purposes.
(42:58):
This is not a time machine for leisure.
Mm-hmm.
And it's, you're gonna useit to get better at your job.
When are you going?
I'd probably say early 1900's.
And California.
Oh see, what are you doing?
What are you, what are you doing?
What are you, why are you, why areyou going early 1900's California?
I just wanna see them, you know,hash out all the water rights and
(43:20):
making the world out out there.
Alright.
That exist today.
I hadn't been, be a lot simpler.
I'd go 2002 and the cornbelt and pre RFS standard.
Yeah.
Yeah.
Okay.
Buy a bunch of farmland.
Yeah, yeah, yeah,
Yeah.
Um.
If you had a magic wand, similarlyat your office, you can use for work
(43:41):
and you can use it to gain a piece ofinformation or knowledge that you don't
currently have, what would you use it to?
To learn?
I'd probably, I don't know.
I'd use it just to, yeah, I keep talkingabout water, but like if you could
physically see in the ground exactlyhow everything's actually looking.
(44:02):
I think that'd be really important.
Un underground water vision.
Yeah, yeah, yeah.
That's a good one.
I, I like the, I like the water.
That's, that's good.
You, and I'll say, understand Trump's thepresident Trump's long-term goals here.
Oh yeah.
That's good.
That's,
Yeah.
Just, or just reallyvirtually any politician.
(44:22):
I mean that
No, you're right, you're right.
Trump is the obvious one becauseit, it feels in real time
'cause he is the president.
He's, yeah.
Recently.
Yeah.
But any, that's a good point.
Override, but like.
But if you could just observe truepolitical goals and intentions.
Yeah.
Of any like That's a great magic wand.
You could sell thatone for a lot of money.
Oh yeah.
Oh yeah.
True.
Get outta farmland.
Let's do one more.
The last time you had troublesleeping 'cause you were thinking
(44:46):
about something from work.
What were you thinking about?
Oh, how to start with me?
We're looking at you.
Yeah.
I don't know.
I don't, I'm not very good atpublic speaking, so I'd say the
last time I had to like give apresentation or something, I just
lay awake thinking about it probably.
Mm, okay.
I, you know, probably my, I strugglewith delivering bad news and that
(45:09):
probably is something I, I would,if, if I had to guess the last time
I did it, it'd be something like thatknowing I had some bad news to deliver.
That's good.
That's good.
Oh man.
Hey everybody, this is Chad.
Todd was a little busy, soI'm doing the outro here.
I hope you enjoyed that conversationwe just had with Pete and Kyle.
(45:32):
We did, we learned a lot.
One thing that I really likedis when they talked about.
Farmland investing.
If you enjoyed this podcast, please
like and subscribe and wewill be back in another month
with a new, uh, conversation.
We look forward tohaving you join us then.
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