March 25, 2024 • 62 mins
Unlock the secrets of a thriving agricultural future as we converse with industry titans Will Harris, Howard Halderman, and Don Colter. They bring to the table an in-depth exploration of the delicate interplay between investment strategies and sustainable farm management. Dive into the symbiotic relationship of yields and returns and how seasoned experts like Howard balance the stewardship of a family legacy alongside the creation of institutional farmland portfolios. As the conversation deepens, learn how these thought leaders navigate the challenge of aligning short-term investor expectations with the long-term value of regenerative agriculture. Discover the innovative approaches that allow investors to foster sustainable farming methods without the onus of land ownership. Our guests share their wisdom on incentivizing investment in regenerative agriculture for a sustainable future, highlighting the promise of higher market values for well-managed, environmentally conscious farms. This episode is more than just a conversation; it's a roadmap for the future of agriculture, where the health of our land is the foundation for prosperity.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Will Harris (00:00):
You all take a very linear approach to agriculture.
You're talking about five years, ten years, what?
The number is Very linear and Ithink that's wrong.
I think that agriculture has aliving system that's very
cyclical, not linear.
Colter DeVries (00:18):
I'm Colter DeVries, owner of Ranch Investor
Advisory and Brokerage Services.
I'm an accredited landconsultant with the Realtor Land
Institute and proud member ofASFMRA.
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Colter DeVries (00:51):
Let's start with some introductions, Howard, if
you would.
Howard Halderman (00:56):
Halderman.
I'm in North Central Indiana,in Wabash, Indiana.
We are a 94-year-old company.
We have Holderman FarmManagement and Holderman Real
Estate Services, and we doproperty management for 600-plus
farms in the Eastern Corn Belt,predominantly.
We also do farm appraisals andwe do farm land brokerage.
(01:18):
Primarily, it's going to becorn and soybean land.
That's one business.
The other side of my businessis US Agriculture.
US Agriculture is an assetmanager.
We build farmland portfoliosfor institutional investors.
A couple of our clients, thisis public information, one is
Arkansas Teachers RetirementSystem and the other is the New
(01:39):
Mexico Teachers.
So, in both those instances,the teachers have about 100% of
their pension invested infarmland and we invest all over
the continental 48 United States.
So, we have a set of parametersthat they have given us and we
go out and build portfoliosaccording to those parameters.
We have about 600 million inassets under management today at
(02:03):
US Agriculture.
So, that's separate from myHolderman businesses that you
see the logo for the Holdermancompanies are what my
grandfather started.
US Agriculture, we started backin 2011.
Colter DeVries (02:16):
Now, Howard, 600 million assets under management
and what did you say?
What percentage of the pensionfund is in farmland?
You broke up when that happened.
Howard Halderman (02:28):
Oh, sorry, about 1%.
1%, yeah.
In Arkansas Teachers Systemthey allocated 1%.
They got about a $20 billionportfolio, so that's $200
million, and US Agriculture hasabout $125 million of that
invested, and then US, USB hasthe other.
(02:50):
I think not USB, but oh, theSwiss organization.
Colter DeVries (02:55):
UBS yeah, UBS, UBS, United Bank of Switzerland
and Don Coulter.
You probably have someexperience with United Bank of
Canada and TIAA-CREF and some ofthese large, large
institutional farmland owners.
Tell me about your background.
Don Colter (03:15):
Thanks, Coulter.
I was born and raised in thecattle industry in Colorado and
Arizona and then out of collegeI went through and got my econ
degree and then started into thebanking field.
So, I was in ag finance for 35,37 years, something like that,
and then worked for a largeequity group for about eight
(03:39):
years, both managing farmproperties and as the
acquisition manager.
Colter DeVries (03:45):
I'm going to give a little introduction to
Will Harris.
Him and his daughter, Jenny,have twice been on the Joe Rogan
podcast.
Joe just thinks the world ofWill and had him back on a
second time.
Will is I don't want to speakfor you on your business, Will,
but it sounds like Jenny's goingto be taking on more
responsibility and you have abook out and that book is a bold
(04:10):
return to giving a damn andthat can be bought, probably on
Amazon.
How about on the website, Will?
Will Harris (04:20):
I think so.
I believe they do offer it onthe website, and Jenny is one of
my daughters.
Colter DeVries (04:25):
I have two daughters and two in-laws in the
business here that are in thegradual process of transitioning
control of it.
In the process of transition,which is extremely difficult on
a farm and a ranch, I'm sure asHoward and Don know from
(04:46):
experience and some of theirclients.
Well, let's just get started.
Will, if you can give Don andHoward and I and the listeners
one more time, how would youdescribe your operation?
Will Harris (05:01):
White Oak Pastures is our family farm in Bluffton,
Georgia.
It's 3,200 acres of well.
We own a little over 2,000,lease about 1,000, and we farm
another 2,000 acres.
That is solar and we have a lotof old tech arrays that we
(05:24):
graze, so a little 5,000 acres.
My great grandfather startedthe farm in 1866, followed by
his son, my grandfather,followed by his son, my dad,
followed by me, followed by mytwo daughters and two in-laws.
We currently have pastures,five red meat: species cows,
(05:48):
hogs, sheep, goats, and rabbits.
Five poultry species (05:50):
chickens, turkeys, geese, guineas and
ducks, organic vegetables, asmall way, honey.
Whatever the land will producethat we can market.
Colter DeVries (06:09):
Now, five species of poultry, five species
of livestock.
Don and Howard.
What are your clients lookingfor?
Is it just an annual yield of4%?
Can't you accomplish that withthis diversified crop mix?
Don Colter (06:27):
I think it's both looking for annual yields, IRR,
but also scale.
I don't know how are hisclients, but other equity groups
that I've been involved withare looking.
They'd like $5 million at thebottom and $100 million or $200
(06:48):
million on the upper end forinvestable assets.
They're looking to place aminimum of $5 million.
Will Harris (06:56):
Yeah, I can probably shed a little insight
right there.
What we do here is not scalablein my mind and in anything like
those kinds of numbers.
It is highly replicable.
There can be a lot of them, butin terms of scale, there is a
high side to it.
We may be on it.
(07:17):
We sell about $25 million a yearand I don't want to go to $30
million.
I actually didn't want to go to$25 million.
We're actually operating at alittle bigger scale than I'm
comfortable with.
I found it necessary to go tothat because I failed to say
that we did build aUSDA-inspected red meat plant.
(07:40):
We did build a USDA-inspectedpoultry plant.
We have some customer facing,public, facing businesses going
on here, a store, a lot oflodging.
We're very, very rural here forEastwood and the city, you know
(08:01):
, maybe not, you know, I'd saydefine that where you want to.
It's one of the poorestcounties in the United States of
America.
In fact, this county was thepoorest county in the United
States of America in 2020.
So, it's we have, we've got 170or so employees, largest
(08:23):
private employer in the county,and housing is an issue.
Howard Halderman (08:27):
So we've spent a lot on housing as well.
Howard.
You're in Southeast Georgia,southwest Georgia, southwest,
okay.
Colter DeVries (08:37):
Howard, 25 million on 2,500 acres sounds
like a very compelling PPM to gopitch.
Oh, now 5,000 acres 25 millionon 10,000 acres sounds like a
compelling PPM to pitch.
Howard, why couldn't you takethat model and I hear that scale
(08:59):
is a factor, but replicabilitymay not be why not?
Why not break it out to whereyou have the the corn and
soybean enterprise and then youhave an independent entrepreneur
like me who would run goatsbehind it, and then someone else
who'd run cows behind it,someone else who would take that
(09:20):
risk and shift it to the localvalue added market that Harris
has have there.
How come you?
Why couldn't we just chop upthese?
And I know Will doesn't likespecial, Will and I talked about
specialties last time and hedoesn't like that that I was pro
(09:41):
specializing in certain areas,but why?
That seems sellable to me,Howard.
Will Harris (09:48):
So, farming on the scale that you're advocating is
a wholesale business.
Your customers will be one ofthe big meat companies, one of
the big grain companies, one ofthe big, you know, and that that
does not work for me.
So, farming the way we farmhere, it is absolutely a deal-
(10:12):
buster.
If I've got to go through a bigmultinational ag company, you
know you're producing acommodity product and you're
taking commodity prices and mybusiness won't work like that.
Howard Halderman (10:25):
So, to answer Colter's question, I don't know
that we wouldn't invest in it.
But, here are the challenges.
First of all, they do have areturn hurdle.
That's important.
We have to develop what wethink a 10-year timeframe.
The internal rate of returnwill be on this, which includes
not only cash return but alsovalue appreciation.
(10:49):
One of the things, one of thedynamics, that becomes a
challenge with this operation iswhat happens if Will Harrison,
his two daughters, are notinvolved.
Are there other tenants thatcould step in and operate it?
And I would argue, with thediversification that Will has,
that might be a long shot or animpossibility, to be fair.
(11:10):
I mean it sounds like a veryunique situation.
Now, that said, you know we'vegot clients that are invested in
blueberries in SoutheastGeorgia.
We're the largest producer ofblueberries in the state of
Georgia and now they're good.
Those are going to Michiganblueberry growers.
We have put in two processingfacilities on our properties
there, so we are buying up thevalue chain.
(11:32):
Is it a commodity?
Yes, it's not a large scalecommodity like corn and soybeans
, but it's still a commodity atthat point.
But in these facilities we'regoing direct to the clamshell,
that's going directly to Krogeror you know, you name the
retailer.
We've got a citrus operation inSouth Central Florida.
It's a specialty tangerine thatbasically it's a unique variety
(12:01):
that sold out every box thelast couple of years that it's
been available.
It also has some resistance togreening.
That's a situation where we'reproducing a crop that goes
directly to the retailer andthere to the consumer, but that
is not what Will's doing.
I mean Will is runningagro-tourism mixed with ag
retail and a very diversifiedoperation.
(12:24):
Not saying we wouldn't have aclient that would look at that,
but I think the concerns overour ability to replicate the
management of that if Will andhis daughter say no, we're not
doing it anymore, that couldbecome a challenge.
Now on the sustainability front,we have a client and I've not
(12:44):
named them because it's aprivate deal but we have a
client that wants to buy farmsfor lack of a better term, I
mean that is a very general term, but any farm operation that is
doing things in an ESGsustainable way, they don't
really define exactly whatthey're looking for, outside of
(13:05):
the fact that they say we wantto do it better than those
operators in the generalvicinity around the asset that
we're buying.
So that may involve cover crops, they may involve organic, that
may involve reduced tip lids orno tip lids.
That could be a whole host ofthings that are viewed as
sustainable or ESG interesting.
So we do have clients lookingfor that aspect of what Will is
(13:28):
doing.
So I wouldn't rule it out.
Probably $5 million is going tobe your minimum, just because
we don't have any other assetsin that part of the state.
If it were in Indiana, Illinois, places where we've got assets
(13:50):
already, then we could go downto $1 million.
So we've got some latitude togo down to smaller, bite-sized
pieces.
But I think the locally grownagro-tourism, agro-retail that
Will has, that's going to be amanagement structure.
You're going to have a lot ofemployees.
(14:11):
Honestly, our clients aren'tsuper excited about employees.
We do employ all the labor onthose blueberry farms and we do
it through an organization thatbrings in the seasonal labor to
harvest the blueberries for us.
So we do have instances wherewe're directly operating the
(14:31):
farm, taking all the product asyour return and paying all the
expenses, including labor, toget it done.
But we've got to have an onsitemanager that manages every
detail day to day.
US agriculture doesn't have theexpertise to do that, so we're
going to need somebody like Willand or his daughters or that
team that can come in and managethat operation.
(14:52):
If they're not there and Ithink suspicion that's going to
be really hard to replicate.
Will Harris (15:00):
I agree with everything Howard says and I
think there's an even greaterpoint that he didn't mention,
and I think the biggest issue isI've got some debt but I've got
3 times as much equity as I'vegot debt and I'm satisfied with
(15:22):
a very, very low return on myinvestment, not just because of
lifestyle.
That's great, I enjoy thelifestyle.
But, my farm has gone from a 1%organic model to over 5%
organic model.
That's excellent.
In the last 20 years and Ican't do it as fast as I read
people do it took me 20 yearsand I've been doing it for God's
(15:45):
blessing.
But, and if I I got friends whoare land appraises and they
appraise my land, they say, well, if it's half percent, 5%,
we're going to appraise it forthe same thing.
And they do that's fine.
The productivity of my land at5% is exponentially greater than
the production capacity of myneighbor's land at a half a
(16:09):
percent and that means a lot tome.
You're building my land up doesnot show up on my financial
statement.
If I was working it for aninvestor, you might, but the
ones I know wouldn't give memuch credit for that.
But for this family farm thatwe own, it has exponential value
(16:32):
to me.
So, if I can operate the son ofa bitch at break even and
increase that kind of value,this is a good deal for us.
Colter DeVries (16:43):
Don, I want you to comment on that, because he
brought, Will already brought upmy next question.
Isn't there long-term value inwhat he's doing?
So if you're, Howard talksabout a 10- year IRR, Don, and
if your hurdle rate is 7%,wouldn't that organic matter and
(17:03):
the sustainability, resiliencyof what Will is doing?
Wouldn't that add value in thelong term?
Or are we still kind of in thisposition where ESG
sustainability metrics, ithasn't been proven out to add
value, that people are taking adiscount to pursue green
(17:27):
investments?
Don Colter (17:28):
Yeah, I would agree .
I think one of the things thattraditional investment hedge
funds, equity funds, is theirtimeline.
I think they can be a littlebit short-sighted in that and,
as Will mentioned, developingthe organic matter and improving
(17:53):
the soil of that nature is avery long-term process.
So how do you measure it?
What's the value of it?
I know you understand you'vegot the metrics of it, but
trying to translate that into avalue and represent that and
(18:13):
communicate that to a pensionfund and whatnot can be
difficult.
Personally, I think it's gothuge value.
I'm a huge proponent of thatregenerative style of
agriculture all regenerativeagriculture, depending on what
level an operator is doing.
(18:34):
So I think it's not new, butnew enough and not measured
enough for a traditional fund.
At many times I think there's alot more light being shed on
the needs for regenerative ag,especially with ESG mandates In
(18:57):
the US.
In the EU it's become a lotmore focused on with their SFDR
mandates.
In the EU it's really builtinto their reporting
requirements and I don't thinkthe US has quite got there yet.
Will Harris (19:15):
I wish you'd filled the news whole words.
I don't know what to end themdown.
I can't end you.
I knew that one.
I knew you, all of us, y'allspeaking acronyms.
I have no idea what you'retalking about, but I will say
that, and I certainly don't mean.
I want to be very respectful tothis group here, but you all
(19:37):
take a very linear approach toagriculture.
You're talking about five years, 10 years, whatever.
The number is very linear and Ithink that's wrong.
I think that agriculture has aliving system that's very
cyclical, not linear, and Ithink that's the reason I'm
(19:59):
satisfied with almost no returnon my investment.
As long as I know, I'mexponentially building the
production capacity of my farm.
We've owned it for 160 orwhatever number it is.
You know my children may sellit.
If they do, they'll sell it andit will be sold.
I'll be dead.
But, what I'm doing is puttingthem in a position so they can't
(20:24):
own it for another 160 years ifthey want to, and I realize
that's not marketable in thesituation that y'all are in.
To operate this in a cyclicalmodel, which is the way I think
that a natural system reallyneeds to be operated.
You can't look at it as anannual return or decade, or
(20:50):
maybe not even generational.
It's got to be perpetual.
Colter DeVries (20:54):
Howard, aren't we seeing more of these
institutional owners turn intoessentially permanent capital,
this protection of principle andgranted, I think Will might be
a little fresher at even talkingabout these types of assets as
balance sheet assets, but we'regoing to today.
Are they not becoming morepermanent capital?
(21:18):
And it's just this excellentprotection of principle.
And maybe is that message notbeing marketed more effectively
that hey, if you take a smalldiscount on the annual yield,
we're going to actually improvethe principle in the long term?
Am I way off in that thinking,Howard?
Will Harris (21:38):
Well, you're wrong.
You say small discount.
I think you'd be a hugediscount.
Howard Halderman (21:43):
Will's not wrong.
We do have to look atperformance metrics, and so
we've got to really try tocreate a 10-year internal rate
of return that hits the marksthat they want, and if they're
at 68% internal rate of return,then that's probably a
transaction that we can look athonestly.
(22:03):
I think how it?
But your right culture is thatthere are more and more groups
out there that want to investand they do want that long-term
sustainable theme here.
It would work well with anoperator like Will and this is
where we've done it with theseother producers I mentioned
earlier is that we don't operatetheir core business, but what
we do is we come in and Willsays, hey, I want to buy this
(22:26):
1,000 acres next to me and Iwant to do the same thing on
that 1,000 that I've done on myown farm, but I don't want to
put my capital into it or itcan't whatever.
Then, mr Investor, could youstep in and be the capital
source for?
That.
And I'm going to operate that1,000 acres under my system,
which is a very sustainable,long-term cyclical, as Will was
(22:48):
describing, a very holisticapproach to soil enhancement and
making that farm better 10years down the road than what it
is today.
Then we can build the modelfrom that and by leasing that to
his operation and he may notwant to go to $30 million, but
it could help him grow hisoperation in some fashion and
(23:10):
not have the capital tied up inthe land resource.
And so that's what we're doingin many instances, whether it's
apples in Washington State orthe oranges down in Florida
we're going in as a partner withan existing operation and
providing a capital source forthem to expand and grow their
operation, and then our owner,our client, receives the
(23:32):
financial rewards and thebenefits and the returns to that
land and that investment intrees or whatever.
So, that's probably a more of away to look at it than us
coming in with an investment inthe whole operation.
Because, as I said earlier, totry to replicate that management
team and oversee thatmanagement team, I think Will's
got a unique situation there.
(23:53):
These obviously are verysuccessful, so, but I think
being a part of that andproviding capital as part of
that would be something that wedo on a regular basis.
Will Harris (24:06):
I bought every farm that's sold for the last 20
years that touched mine.
I bought it and I have reachedthe point I can't keep doing
that and there will be otherfarms for sale.
This country down here was in250 acre farms or so when I was
(24:26):
growing up and those people haveleft and consolidated.
Now, they're just a handful ofbigger farms, most of them
industrial peanut, cotton, corn,root crop farms, and most of
them don't own a lot of land.
They lease land.
So I've been buying land andI'm very pleased that I did.
The land I bought escalated invalue significantly over the
(24:51):
last 10, 15, 20 years and I'veincreased the organic amount of
the productivity of it and putit in grass and fenced it,
cross- fenced it, chopped it upinto 150 something, which is
very advantage.
(25:11):
We made the family decisionrecently that some of these
other little farms will beselling in the next decade or so
and we probably can't buy them.
I just don't want to incur therisk at the low return that we
generate.
I don't want to put my familyat risk.
(25:32):
We have some debt now, but it'spretty manageable.
I just don't trust a big land-buying outfit.
I mean I can't stop them frombuying it.
But if they did, it's hard forme to trust that they would
allow me to improve the land andshare in that benefit, and I
(25:54):
can't afford to pay them whatland leases for if I'm going to
improve it.
You got to decide what you want.
You want the organic amount togo from half a cent to five a
cent or do you want to collect100 or like a rent?
You fellas may be different.
I hope you are.
I hope you are.
God bless you.
But everybody I've ever talkedto it was about the return they
(26:16):
can get on the land.
You know they get in the mostmoney they can and the most
money they can get is going forsomebody that's going to get the
hell out of the land.
And that's what I got to half apercent for them, to your
organic amount.
Colter DeVries (26:32):
I suspect that what Will just said you've heard
before from some of yourstrategic partners.
You've heard before from someof the competition.
I understand that when you goout looking at a farm, it's not
other institutions that you'rebidding against.
For the most part, it's theneighboring farm.
(26:52):
How do you, Don?
How do you address the concernsWill had just mentioned about?
Well, maybe I am backable.
Maybe it does takeinstitutional financing to
expand.
How do you address?
Because you've heard, I'm sureyou've heard this before from
other farmers.
Don Colter (27:12):
I have.
You know, when you're going outlooking at properties to
acquire.
Maybe it's unique in my area uphere in the Pacific Northwest.
A lot of the larger qualityoperations are being sought
after by institutionals or someof the large corporate entities.
(27:35):
There's not a lot of smallerindividual family farm
corporations that are gettingthem.
So, that's one of the thingsthat are unique up in this part
of the world.
But you're right, you do hearthat.
You know I'm going to improvethe soil but that takes time,
(27:56):
that takes money and can weshare in that?
Yeah, that's.
It's again a difficultdiscussion sometimes with the
investors because they've gottheir investment horizons and
return requirements to meet fortheir pension clients, for
(28:19):
example.
Colter DeVries (28:20):
Howard, how do you allocate or deal with this
vested interest vesting andmaking sure that the tenant is
operating to the best of thesoil's ability?
And we haven't even talkedabout community, and no,
community is a big piece aboutwhat Will does, but we're
(28:40):
talking numbers on a balancesheet.
So vested interest sharing,risk sharing, returns, Howard,
how do you approach that?
Howard Halderman (28:50):
When we look at a opportunity, we're going to
first of all buy something andit isn't so much about the piece
of property as it is about theoperator, and the operator has
to be able to bring value andprobably is going to be a little
special in each marketplace andthen we want to invest
(29:13):
alongside them.
So you're partnering with them.
I mean that as a partnership,we're not seeking the highest
rent, we're seeking a replicablerent, so it's a rent that we
could get from five othertenants.
That way we know worst casescenario this guy gets hit by a
Mack truck.
We've got somebody else thatcould step in and pay that kind
of lease rate.
It isn't so unique that you'restuck.
(29:36):
We took our investors on afield trip in August and we do
this every other year.
We went to Northern Illinoisand we went to a partnership
that we have with this familyfarm operation.
It's two brothers and theirfather that they have solar,
they have wind, they have goneinto cover crops and no till in
(29:58):
Northern Illinois.
We're partnering with them andbuying land.
Basically, they're saying, hey,we can't put our capital in land
, Halderman, you've got thisclient out of the EU that's
willing to take a little lowerreturn because they want to
enhance the value of the soillong term, and so we're then
basically acquiring pieces ofland for them that they're going
(30:19):
to operate in this sustainablefashion.
We certified a leading harvest,so leading harvest is a
certification method that hasbeen kind of accepted by a lot
of institutional asset managers,and we certify all of our
properties to that, whichbasically means that you're
doing things in some part of anESG compliant method.
(30:39):
So, Will knows what that is.
That's environmental, socialand governance practices that
are sustainable long termsustainable in all those three
categories.
So that's the way we do it.
But we really look to try tobuild a long- term partnership,
and if you're going to build apartnership with a tenant for 10
years, 20 years, which is theinvestment horizon a lot of
(31:00):
these investors have they haveto make money too.
So, Colter, we're not doingthis and saying, hey, we want
the highest rent possible and wereally don't care what your
side of the equation looks like.
That's false.
We want to have them beprofitable, because if they're
profitable, they're going toreinvest in that property and
likewise we will invest in themand it becomes a great
(31:21):
relationship and they'll bringus more deals over time and it
just grows that overallportfolio and will hit the marks
that our clients are lookingfor.
Colter DeVries (31:30):
Will.
How do you feel aboutcertifications, oh?
Will Harris (31:34):
You know, I'm just burned out on them.
I mean, I'm notanti-certifications.
I've had just about all of themyou can have.
I don't think you need many Ihadn't had at some point.
Today, we're certified by planto market the slavery deal.
American Grassville Associationcertified humane properties and
(31:57):
mobiles.
I used to be certified organic.
I got pissed off when theyallowed hot house tomatoes to be
certified organic.
I've had many of them.
I don't hate them, but they'reall.
This is another thing I feelvery strongly about is, I went
(32:20):
to the University of Georgia.
I majored in animal scienceundergrad in the 1970s.
The courses were taught byprofessors that were from
Montana and Massachusetts andMaine.
They could teach anywherebecause it was so repostant.
(32:41):
I very strongly believe thatevery ecosystem has rules that
you go by.
The laws of nature, the cyclesof nature, the energy cycle,
mineral cycle, carbon cycle,water cycle, dot dot dot.
We name a bunch of them, areuniversal, but the application
(33:06):
in the coastal plains of Georgiaversus the Rocky Mountains,
versus the Great Plains versusNew England is different 30
miles from here.
I'm disturbed by the waycertification programs are
designed to work anywhere in theworld.
(33:30):
I don't hate them, I just sortof burned out on them.
I got a bunch of them.
We still got a bunch of them.
They're important to mydaughters.
They're not important to me.
I don't like them, but they'rejust so.
I don't know what the word is.
They just apply to everywhere.
Colter DeVries (33:51):
So they really apply to nowhere.
Homogenized to.
Don, let's get philosophical.
You mentioned that you likeregenerative agriculture.
You're an old cowboy yourself.
Really, you're a cowboy in asuit.
Today.
It looks like you're going togo hunting after this.
But is there a future where westart seeing more UBS, UBC,
(34:21):
craft investing in regenerativeagriculture with livestock?
Don Colter (34:26):
I think there is an interest in regenerative ag and
I think one of the things itgoes much to the same as organic
and the others.
What's regenerative to me isprobably very different to Will,
to Howard, to you, so it's muchto the same as what's a GMO.
(34:49):
I hear people get on thesoapbox anti-GMO.
Howard Halderman (34:54):
What is it?
Don Colter (34:55):
Is that selective breeding?
Is that gene splicing?
It's all genetically modified.
So my backup into just ageneral category of regenerative
agriculture I think there'sgoing to be more institutionals
involved in it.
There's one company, VEDA.
(35:18):
A former colleague of mineworks there.
They're kind of a start-up butthey're really trying to work
with tenants on regenerativepractices and for them that
might just be cover crops,precision agriculture, to
selectively spray, toselectively apply fertilizer, so
(35:42):
they're trying to limit thatinput and regenerate and build
soil health.
So, like I said, if I step backjust to my old cowboy roots, my
dad do I say take care of theground, the ground takes care of
you.
It's fairly simple.
So how do you blend that intoinstitutionals?
(36:04):
I, Howard, hit on it.
You have long-termrelationships with quality
tenants that, as is one of myformer colleagues, do the right
thing when nobody's looking.
So it's harder to measure, butthere's interest in it and I
think if the managers, fundmanagers or those of us who've
(36:30):
been involved, can convey thatmessage as well as deliver
whatever a decent return that aclient might need, I think that
is a critical part into thechain as well, Howard you've had
those discussions, I'm sure.
Colter DeVries (36:51):
What is the challenge with the clients that
approach you and say we want ESG, we want green, we want
regenerative, but we also want a4% annual yield.
Where's the friction there?
How have those conversationsbeen going?
Ad (37:08):
Well from our standpoint, what we've always done at US
agriculture is.
Howard Halderman (37:13):
I believe in the public, transparency, and
we're at a stage where we don'thave to take the next dollar,
and so our answer has alwaysbeen I can tell you I was at a
meeting in New York City atGlobal Ag Investing Conference,
and I had these two investorssit across the table from me and
they wanted to hear what wecould do, and so I started
(37:34):
talking to them about what wecan do and how returns are
somewhere in that 6% to 8%long-term internal rate of
return and they said, well, wewant 15%.
I said, well, that's not thekind of agriculture that we do.
And they said, oh, I said so, Iguess we're done here, and the
conversation ended in fiveminutes because it so.
(37:55):
That's the approach that we'regoing to take.
If somebody came to me and said, well, we want this ESG
compliant, leading harvestcompliant, you know, whatever
certifications Will doesn't carefor.
Honestly, it's a lot of work onour end too.
So I completely get hisfrustration.
And if you're designing one ofthose, it has to be general,
because it has to fit a thousanddifferent operations.
(38:17):
It can't be just, you know,specific to one region or one
spot, because then you don'thave enough scale to justify.
So it is frustrating because itis so general and you're
answering questions about cropsthat don't apply to you, and so
I get all that.
But if we have a client thatcomes and says we want that, all
right, we can do it.
(38:38):
But here's reality it's probablygoing to cost you a little more
because we have more managementthat we have to do and you make
sacrifice some annual yield forthat cash yield.
But we believe long term you'regoing to end up with a better
farm, and so the onus on us asthe manager then is how can we
(39:00):
document what Will's documentingand show value in that?
Because I would argue, ifWill's going to a 5% organic
matter and he's telling me hisproduction, annual production,
is better than all of hisneighbors who are at half
percent, we can monetize that.
I can sell not that Will wantsto sell his farm, but I can sell
that.
Because if he's telling me whyI can grow 220 bushel corn on
(39:24):
half the water they're using orhalf the fertility they're using
because my organic matter isbetter, then there's got to be a
.
I can operate that on a customhire basis and make a higher
rate of return than what I canon a normalized custom lease.
So that's the answer I wouldgive is how can we formulate a
(39:46):
partnership that capitalizes onmaking that a better farm over
10 years, and how do wetranslate that to real value
when the appraiser comes out toappraise it?
And granted, we do 1200appraisals a year at Halderman,
so I know how the appraisal gameworks and you have to use
comparable sales.
Well, how can I show thatappraiser that this is certified
(40:08):
to leading harvest and it's gota better organic matter than
all these comps you're using?
And therefore that translatesto a higher APH, which, at the
end of the day, is higher farmincome.
Will Harris (40:20):
I'll tell you what I'm going to start.
I bought a little farm out hereseveral years ago and I had
borrowed money from the banksent an appraiser that I didn't
know and so often theseappraisals are kids, but this
guy was about my age and Ididn't send anybody with him.
I took him myself because Ijust wanted to and I showed it
(40:43):
to him.
We have a nice in-depthconversation about farming and
land management and it was good.
I thought he was just on cuewith his comments and I said I
want to show you something.
So I took him to another farmthat I had bought, that we had
really managed well, I think,and the organic model was up
(41:06):
north of 5% and it was rightbeside the farm I don't own.
In fact the cousin of mine ownsit.
There was a half a percent andI said these two farms are about
the same size.
They both got a well, both onthe road.
How would you appraise it?
And I said no.
But before he said out some,this was 5% organic matter.
(41:27):
That was half a percent.
He said I'll appraise them forthe same thing.
I said you would?
He said yeah.
I said no, I'm ashamed.
He said that to me heunderstood, but the rules that
he felt compelled to play by heappraise those farms.
At the same time, I can tellyou that the farm that we had
(41:49):
improved will yieldsignificantly better, whether
it's grass or grain or grapefruits, don't matter.
Howard Halderman (41:59):
Well, here's the thing you're building up
your organic matter.
It's going to use less water,right?
Because you've water-holdingmore capacity in that organic
matter.
So not only is it going to havean enhanced yield, but your
cost if you're irrigating isgoing to be less.
So a lot of regions around thecountry, water is extremely
(42:20):
valuable.
And how can you cut that waterusage?
I can monetize, which anappraiser needs to use an income
approach.
If he's purely going off salescomparison, then he might
struggle to come up withadditional value for 5% of the
antimatter.
But on an income approach,you're using the same cap rate
(42:42):
but you ought to have a higherincome because your farm
generates a higher cash return.
Will Harris (42:48):
Yeah, but now we're on the Floridian aquifer, yeah
it's the best aquifer in thecountry and water is cheap, with
water costs nothing other thanthe energy cost of getting out
to ground and all the crop.
Yeah, and I can tell you so theresearch shows, and I believe,
(43:09):
that 1% organic matter willabsorb a 1-inch rainfall.
It's 27,000 gallons a acre andI believe that I've just watched
enough that I not that it comesin 10 minutes, but if it's
gradual, yeah, just so happenstoday we got a 5-inch rainfall,
that's over a 36-hour period.
(43:29):
We just got one.
That's the reason I'm in here.
I could take you to where myland.
Very little water was runningoff and what was running off was
clear.
Off an adjacent farm.
Four and a half of the fiveinches ran off because it's only
(43:50):
half an organic matter it's notgoing to absorb, and the land
was red with clay subsoil.
The water was red.
So you know, there's no doubt.
There's no doubt.
Well, everything I'm tellingyou is just spot on.
I can show it to you.
(44:11):
But in this farming system itjust doesn't matter much because
that guy doesn't own that land,he doesn't care, he's pumping
water.
That's cheap, cheap water.
You can pump water todaycheaper than you can build
organic matter to absorb rain,and it's just the economics.
Howard Halderman (44:31):
In your area, but that is not true.
Will Harris (44:35):
And today it won't always be true.
It's true today.
Right, yeah, good point.
Colter DeVries (44:41):
What I hear somewhat, Don, is are we lacking
in being able to monetize someof these public goods?
The soil runoff, drought,resiliency, the reduction of
pesticides, herbicides you know,Will was talking about his
neighbor's erosion that's, andWill's management is essentially
(45:07):
a public good.
Are we lacking ways that maybeit's an incentive scheme on
behalf of the institutions?
Are we lacking ways to monetizethat public good that Will
provides?
Don Colter (45:21):
I think it's either a lack of monetization or the
lack of particular investors toaccept a lower return to do
these practices.
So, yeah, I think there wouldbe.
If there's a way to monetizethem better, I think that would
definitely help.
You know, you got to have thefeedback loop on your
(45:44):
investments for things and Idon't know what that because.
Will Harris (45:48):
But I can tell you this I don't buy the 80 miles
from the Gulf of Mexico and theGulf of this, that part of the
Gulf of Mexico, used to be oneof the best oystering fisheries
in the world and now it's a bigold dead zone.
They banned oystering and allthat di-nitroaniline and
oligantil phosphate andphosphate and nitrogen that we I
(46:12):
was doing it too put on my landand my neighbors put on their
land, went down Spring Creek tothe Chattahoochee River, to the
Gulf of Mexico and did thatdamage.
And I was part of that.
They were during the era thatI'm not anymore, but during the
era that that happened I wasputting out chemical fertilizers
(46:34):
on the best sides as much asanybody else, probably a little
more than my neighbors were.
But that's a cost that we allbear, and I can name a lot more
of them if you want me to, andso I mean what we're doing is so
wrong and so uncorrectable thatI don't think we see it done in
(46:55):
my lifetime.
I think what we're doing hereis one of the solutions for
these problems, but it'sexpensive and I don't think I'm
not real optimistic about it.
You have to tell my familywe're doing what we're doing
here for us.
We're no longer part of thisgreat dream of farming becoming
(47:22):
deindustrialized and changing.
Maybe it will, probably won't,certainly won't during my
lifetime, probably won't duringtheir lifetime, may never happen
.
But it's okay because we'rebuilding a tremendous amount of
resilience into this land and wehave built a market for $25
million worth of product thatthere are consumers that will
(47:43):
pay enough for it to allow us todo it, and the land is getting
better and better.
And I don't know this any.
I don't know how that looks.
I don't know how people saywell, you have 5.5% organic
model.
You can't get to 10, correct,but I can be twice as deep, you
(48:07):
can be.
Instead of four inches at 5%,it can be eight inches at 5% not
during my lifetime at somepoint.
So doing the right things forsomething as perpetual as the
land is a right freaking thingto do.
And if you expect to trade it,you know when I buy a car, I
(48:30):
don't buy the nicest automobilein the road and I don't spend
incredible amounts of money inmaintaining it because it's a
wearied.
How many non-depreciatingassets are there?
Land?
Very few.
Precious jewels, preciousmetals, maybe art I don't
exactly believe it, but maybe,but there aren't many
(48:52):
non-depreciating assets and ofthe non-depreciating assets, the
only one you can do somethingwith is land, and the only one
that you can improve is degradedland.
So if I don't see how a personwith a family that well, if
(49:16):
you're 20 years old and you'rejust gonna be doing this until
you're 60, don't do that.
Don't do that.
But if it's going to be moreperpetual, it's the best
investment you can make.
You know, again, we've got alot of equity.
We pretty good at doing whatwe're doing.
(49:36):
We built a pretty good business, but there's not a lot of
return and I'm fine with that.
Now, I'm fine with it.
If it was, if it was spendingoff cash, we'd be paying taxes
on it and probably pissing itaway.
So what's happening?
You know it's going back intothe improvement of this
perpetual asset.
That's exactly where I'm going.
Colter DeVries (49:58):
Howard, you were gonna chime in after Don.
What were you gonna say?
Howard Halderman (50:02):
Well, I think so.
I did two seven hours today andI did four last week, and one
of the slides that I show inthose seven hours we had two
auctions November 29th of 2022.
So on the same day we soldthese two farms at auction and
they were about 50 to 60 milesof Carter Creek each other.
In Indiana it's prettyconsistent.
(50:24):
Across Northern Indiana it'scorn and soybean land.
There's a little bit oflocation difference, I'll give
you that, but not a ton betweenthese two farms.
The soil productivity index, theinherent soils that are there
the farm in Cass County was 148,though Delaware County was 145.
Very similar productivityindexes.
(50:46):
The range in Indiana is like188 on the best and down to
below 100 on the worst.
So very average farms,soil-wise for the state.
Those two farms sold for 100%different values.
The Delaware County farm brings15,000 an acre.
It had the reputation like WillHarris's farm would have.
(51:08):
It had the reputation as thebest farm in the county.
So the farm in Cass County hada reputation as a very poorly
managed farm, not taken care of.
It brought 7,500 an acre,exactly one half the value of
the other farm.
Now, some of that is made up inlocation.
(51:29):
I'll give you that because thispart of Cass County is not a
great location and the DelawareCounty is probably a little
better for location, but not allof it.
A lot of it, I know, had to dowith the fact that that farm in
Delaware County had bettermanagement.
They cleaned up their fencerows, they had better weed
control, they had betterfertility programs.
I don't know whether they weresustainable or not, but the
(51:52):
community viewed that as gosh.
That's a really well-maintainedfarm, well-maintained asset I'm
buying.
I know when I've sold hundredsof farms at auction, I get the
comment when you hear somebodycome in and they say, well,
that's a wet farm that's neverhad a fertilizer truck across it
, those are negativereputational comments.
That brings less value Then if.
(52:13):
I had the soil test from WillHarris's farm and I could show
5% organic matter and I couldshow top-notch fertility and I
could show top-notch productionyields.
If I had that to market as abroker, that's going to bring
more value.
I truly believe it's there andI know I'm disappointed that the
appraiser gave Will that kindof answer.
Because you can adjust forquality.
(52:35):
That's allowed for an appraiserto adjust for.
You can adjust for time, youcan adjust for location, you can
adjust for quality and that'swhat his answer should have been
.
Yeah, you know that 5% reallyought to be better than 1.5% and
I can appraise those for twodifferent numbers and I can
justify it.
I tell all my appraisers and wedid 1,200 appraisals last year,
(52:56):
so we're not small in thisbusiness I tell them all, when
you do an appraisal you betterbe able to sit on the stand and
defend it.
You know, very seldom will weever go to court.
You know it's not.
It'd be a divorce case orsomething like that.
So most of the time you're doingit for a loan-based collateral.
But if you always mentallythink about, I can defend it.
Well, I know I can defend WillHarris' quality adjustment
(53:19):
because I know additionalorganic matter can absorb more
rainfall, I know it's gonna holdmore rainfall, I know it's
gonna hold more fertility andthe fertility is gonna be more
available to the crop, whichtranslates to a better yield.
And a better yield at the endof the day is gonna generate
more farm income.
And a farm is worth.
What it produces is income.
It's an income-producing asset,so I think you could easily
(53:40):
justify a higher value.
I don't know I'm not giving youan exact answer as to what
that's gonna be, but it's there.
I think it's provable.
And that example from you know15 months ago is one of the
examples I use in those seminarsto say here's why you take care
of your farm.
Colter DeVries (53:56):
Well, I know I told you guys an hour and a half
, but I'm comfortable with thegood hour we've done.
This has been excellent for meand I hope you've enjoyed your
time as well.
I do wanna have some outros,though, so taking us away.
Final thoughts.
Will Don Howard, kind of aslet's go full circle, do we see
a future for the more scalableor replicable or repeatable
(54:22):
institutions looking to getinvolved with what Will is doing
?
You're shaking your head, noWill.
Why is that?
Will Harris (54:29):
Well, it's just, you know, I think that the idea
that land is a perpetual assethas been ignored or taken for
granted or considered to be, youknow, more like a tract or a
barn.
This is where you can get outof it for this period of time.
(54:50):
And I think that, while theseguys made me understand, I seem
to, and I credit you being ableto understand increasingly value
by increasing the micro-gilllife organic amount of nutrient
density dot, dot, dot.
Most people don't.
And it's hard for you know, theland that I have bought and
(55:15):
paid for paying for.
You know, I'm willing tooperate on a super low return
because I think I'm buildingsomething for myself.
If I were building it forsomeone else, I'm not sure how
we divide that benefit.
I don't know what's fair.
You know, I knew I shouldn'tget it all, but he shouldn't
(55:38):
either.
And I don't know, and it's asoft asset valuation.
I mean I can't tell you I'mgoing to increase your land by a
half percent every year for thenext 10 years or whatever.
I don't know that.
I know I can improve it, I'msure you've done it, but the
guarantees would be difficult.
(55:59):
So, I, you know, I just don'tthink that most investors I mean
, I know some rich people andthey're good folks, but I don't
think they have this depth ofunderstanding and I don't think
that they view the land as aperpetual asset.
And if they do, they're notgoing to own it in perpetuity.
Colter DeVries (56:21):
Well, that was.
That was kind of doom and gloom.
That wasn't the outro I waslooking for, Will, I'm a dumb
and doom and gloom guy we'recalled.
Will Harris (56:28):
I've lived on here a long time.
I'll show you my scars.
Colter DeVries (56:35):
I want to hear a little bit more about
"undefined bold return to givinga damn your book White Oak
Pastures, as we take it out andhand it off to Don and Howard
real quick.
Will Harris (56:45):
Yeah.
So I you know I didn't.
I didn't think I could write abook.
And now I know I couldn't writea book.
But we were contacted by RandomHouse We've got three names,
big publishing company and theywanted me to.
They just wanted me to write abook.
(57:06):
They kind of recruiting and Itold them I couldn't write a
book, I don't even read booksand they ultimately hired a
woman to write the book who Ikind of fell in love with.
She designed me, just one of mydaughters, a little sweetheart.
We spent I probably got about50 cents an hour out of my time
in writing the book, but it Imean I'm not the judge of how it
(57:31):
turned out, but it's aboutthese things we're talking about
.
It's about, to great extentit's about my relationship, my
family's relationship with thisland.
Colter DeVries (57:43):
Well, thank you and Don, what's your key
takeaways?
What's your outro leading usout?
Don Colter (57:49):
You know I appreciate Will sharing his
story.
I mean I just on a personallevel and all of what you've
done and wish more people caredlike you do for the ground.
I think that in itself wouldhelp a lot.
You know my personal experienceof you know take care of the
(58:12):
ground, the ground takes care ofyou.
Wish more people understoodthat.
Like you said, investment wise.
I think it's there's moreincentive to do it, but I think
that needs to be more.
And somehow have, like you said, have people give a damn more
than what's my IRR, what's myannual return?
(58:33):
How do you monetize that andthen set it without making it a
regulatory thing?
I think you start getting intothose type of dictates, mandates
, and then you run the risk ofgreenwashing and people trying
to end run a system.
So how do we do that to makeour investors and just our
(58:55):
general society care about thesoil?
Cause the soil is, like yousaid, creating the dead zone in
the Gulf of Mexico.
It's got the runoff in thevarious places.
So how do we incent people tocare more to make it more of an
investment vehicle?
I don't know if I answered anyquestions, but that's my
(59:17):
thoughts.
Colter DeVries (59:18):
Well, my belief is you incentivize people, and
people are inherentlyincentivized by sex, money,
power and control.
Will Harris (59:27):
You can reach a point in sex and I was making
new.
That used to be.
Colter DeVries (59:32):
Howard, what's your key takeaway?
And an outro here.
Howard Halderman (59:36):
Well, I am optimistic because I sit with an
.
We have 600 landowners atHolder and every two years we
have a landowner field day.
And for the last I don't knowsix or seven of those meetings,
I've had some portion of the dayspent on regenerative,
sustainable practices.
Sometimes it was tile drainage,sometimes it was cover crop,
(59:57):
sometimes it was reduced hillage.
It was a focus, in fact.
We talked about ehabitat andshowed them beehives on one
property with what we took themout.
I think out of those clients 600clients, there's gonna be half
that would say, if I could havemy farm farmed that way, I would
prefer that.
Are they willing to give upyield for that?
(01:00:19):
I think of our typical farmmanagement client I think they
would.
They're not all about the end,all be, all yield.
So that transition over to USagriculture, which is
institutional asset management.
There are some that they've gota set return hurdle they want
to achieve, but I see more andmore of those groups coming
(01:00:40):
today culture that say yes, butwe see the longterm view and
these are longterm owners.
You know I don't have any hotmoney.
I tell people if you want today trade agriculture, don't
talk to me.
That's not.
You know this is a 10, 20 typeof year investment and so we're
gonna try to earn you a goodannual return but also improve
(01:01:04):
the value of the farm and over a10 to 20 year time period.
That's where we're gonna end up,is it with a better property?
We can't control the overallmarket.
We can certainly make ourproperty the best it can be in
that region and I think there'smore and more incentive out
there.
People understand the hypoxiazone and what has been created.
They don't want that, you know.
(01:01:26):
I don't think they're all aboutthem.
The end all be all dollar.
I think there's a hybrid therethat we can arrive at, and I see
more and more groups willing tosacrifice a little bit of yield
on an annual basis for thatlong-term goal.
So I'm optimistic that we'regetting there.
It isn't overnight.
It isn't overnight for Will tocreate 5% organic matter either,
(01:01:48):
and so it's each little stepthat we can take, and we can
take another step this year, andanother step the next year, and
we'll get there eventually.
Colter DeVries (01:01:56):
Well, gentlemen, I was trying something new here
with this forum style and Ihope it was worth your time.
Thank you guys for coming on.
Have a good week.
We have you all.
You all take a very linear approach to agriculture.
You're talking about five years, ten years, what?
The number is Very linear and Ithink that's wrong.
I think that agriculture has aliving system that's very
cyclical, not linear.
Colter DeVries (00:18):
I'm Colter DeVries, owner of Ranch Investor
Advisory and Brokerage Services.
I'm an accredited landconsultant with the Realtor Land
Institute and proud member ofASFMRA.
Ad (00:29):
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Colter DeVries (00:51):
Let's start with some introductions, Howard, if
you would.
Howard Halderman (00:56):
Halderman.
I'm in North Central Indiana,in Wabash, Indiana.
We are a 94-year-old company.
We have Holderman FarmManagement and Holderman Real
Estate Services, and we doproperty management for 600-plus
farms in the Eastern Corn Belt,predominantly.
We also do farm appraisals andwe do farm land brokerage.
(01:18):
Primarily, it's going to becorn and soybean land.
That's one business.
The other side of my businessis US Agriculture.
US Agriculture is an assetmanager.
We build farmland portfoliosfor institutional investors.
A couple of our clients, thisis public information, one is
Arkansas Teachers RetirementSystem and the other is the New
(01:39):
Mexico Teachers.
So, in both those instances,the teachers have about 100% of
their pension invested infarmland and we invest all over
the continental 48 United States.
So, we have a set of parametersthat they have given us and we
go out and build portfoliosaccording to those parameters.
We have about 600 million inassets under management today at
(02:03):
US Agriculture.
So, that's separate from myHolderman businesses that you
see the logo for the Holdermancompanies are what my
grandfather started.
US Agriculture, we started backin 2011.
Colter DeVries (02:16):
Now, Howard, 600 million assets under management
and what did you say?
What percentage of the pensionfund is in farmland?
You broke up when that happened.
Howard Halderman (02:28):
Oh, sorry, about 1%.
1%, yeah.
In Arkansas Teachers Systemthey allocated 1%.
They got about a $20 billionportfolio, so that's $200
million, and US Agriculture hasabout $125 million of that
invested, and then US, USB hasthe other.
(02:50):
I think not USB, but oh, theSwiss organization.
Colter DeVries (02:55):
UBS yeah, UBS, UBS, United Bank of Switzerland
and Don Coulter.
You probably have someexperience with United Bank of
Canada and TIAA-CREF and some ofthese large, large
institutional farmland owners.
Tell me about your background.
Don Colter (03:15):
Thanks, Coulter.
I was born and raised in thecattle industry in Colorado and
Arizona and then out of collegeI went through and got my econ
degree and then started into thebanking field.
So, I was in ag finance for 35,37 years, something like that,
and then worked for a largeequity group for about eight
(03:39):
years, both managing farmproperties and as the
acquisition manager.
Colter DeVries (03:45):
I'm going to give a little introduction to
Will Harris.
Him and his daughter, Jenny,have twice been on the Joe Rogan
podcast.
Joe just thinks the world ofWill and had him back on a
second time.
Will is I don't want to speakfor you on your business, Will,
but it sounds like Jenny's goingto be taking on more
responsibility and you have abook out and that book is a bold
(04:10):
return to giving a damn andthat can be bought, probably on
Amazon.
How about on the website, Will?
Will Harris (04:20):
I think so.
I believe they do offer it onthe website, and Jenny is one of
my daughters.
Colter DeVries (04:25):
I have two daughters and two in-laws in the
business here that are in thegradual process of transitioning
control of it.
In the process of transition,which is extremely difficult on
a farm and a ranch, I'm sure asHoward and Don know from
(04:46):
experience and some of theirclients.
Well, let's just get started.
Will, if you can give Don andHoward and I and the listeners
one more time, how would youdescribe your operation?
Will Harris (05:01):
White Oak Pastures is our family farm in Bluffton,
Georgia.
It's 3,200 acres of well.
We own a little over 2,000,lease about 1,000, and we farm
another 2,000 acres.
That is solar and we have a lotof old tech arrays that we
(05:24):
graze, so a little 5,000 acres.
My great grandfather startedthe farm in 1866, followed by
his son, my grandfather,followed by his son, my dad,
followed by me, followed by mytwo daughters and two in-laws.
We currently have pastures,five red meat: species cows,
(05:48):
hogs, sheep, goats, and rabbits.
Five poultry species (05:50):
chickens, turkeys, geese, guineas and
ducks, organic vegetables, asmall way, honey.
Whatever the land will producethat we can market.
Colter DeVries (06:09):
Now, five species of poultry, five species
of livestock.
Don and Howard.
What are your clients lookingfor?
Is it just an annual yield of4%?
Can't you accomplish that withthis diversified crop mix?
Don Colter (06:27):
I think it's both looking for annual yields, IRR,
but also scale.
I don't know how are hisclients, but other equity groups
that I've been involved withare looking.
They'd like $5 million at thebottom and $100 million or $200
(06:48):
million on the upper end forinvestable assets.
They're looking to place aminimum of $5 million.
Will Harris (06:56):
Yeah, I can probably shed a little insight
right there.
What we do here is not scalablein my mind and in anything like
those kinds of numbers.
It is highly replicable.
There can be a lot of them, butin terms of scale, there is a
high side to it.
We may be on it.
(07:17):
We sell about $25 million a yearand I don't want to go to $30
million.
I actually didn't want to go to$25 million.
We're actually operating at alittle bigger scale than I'm
comfortable with.
I found it necessary to go tothat because I failed to say
that we did build aUSDA-inspected red meat plant.
(07:40):
We did build a USDA-inspectedpoultry plant.
We have some customer facing,public, facing businesses going
on here, a store, a lot oflodging.
We're very, very rural here forEastwood and the city, you know
(08:01):
, maybe not, you know, I'd saydefine that where you want to.
It's one of the poorestcounties in the United States of
America.
In fact, this county was thepoorest county in the United
States of America in 2020.
So, it's we have, we've got 170or so employees, largest
(08:23):
private employer in the county,and housing is an issue.
Howard Halderman (08:27):
So we've spent a lot on housing as well.
Howard.
You're in Southeast Georgia,southwest Georgia, southwest,
okay.
Colter DeVries (08:37):
Howard, 25 million on 2,500 acres sounds
like a very compelling PPM to gopitch.
Oh, now 5,000 acres 25 millionon 10,000 acres sounds like a
compelling PPM to pitch.
Howard, why couldn't you takethat model and I hear that scale
(08:59):
is a factor, but replicabilitymay not be why not?
Why not break it out to whereyou have the the corn and
soybean enterprise and then youhave an independent entrepreneur
like me who would run goatsbehind it, and then someone else
who'd run cows behind it,someone else who would take that
(09:20):
risk and shift it to the localvalue added market that Harris
has have there.
How come you?
Why couldn't we just chop upthese?
And I know Will doesn't likespecial, Will and I talked about
specialties last time and hedoesn't like that that I was pro
(09:41):
specializing in certain areas,but why?
That seems sellable to me,Howard.
Will Harris (09:48):
So, farming on the scale that you're advocating is
a wholesale business.
Your customers will be one ofthe big meat companies, one of
the big grain companies, one ofthe big, you know, and that that
does not work for me.
So, farming the way we farmhere, it is absolutely a deal-
(10:12):
buster.
If I've got to go through a bigmultinational ag company, you
know you're producing acommodity product and you're
taking commodity prices and mybusiness won't work like that.
Howard Halderman (10:25):
So, to answer Colter's question, I don't know
that we wouldn't invest in it.
But, here are the challenges.
First of all, they do have areturn hurdle.
That's important.
We have to develop what wethink a 10-year timeframe.
The internal rate of returnwill be on this, which includes
not only cash return but alsovalue appreciation.
(10:49):
One of the things, one of thedynamics, that becomes a
challenge with this operation iswhat happens if Will Harrison,
his two daughters, are notinvolved.
Are there other tenants thatcould step in and operate it?
And I would argue, with thediversification that Will has,
that might be a long shot or animpossibility, to be fair.
(11:10):
I mean it sounds like a veryunique situation.
Now, that said, you know we'vegot clients that are invested in
blueberries in SoutheastGeorgia.
We're the largest producer ofblueberries in the state of
Georgia and now they're good.
Those are going to Michiganblueberry growers.
We have put in two processingfacilities on our properties
there, so we are buying up thevalue chain.
(11:32):
Is it a commodity?
Yes, it's not a large scalecommodity like corn and soybeans
, but it's still a commodity atthat point.
But in these facilities we'regoing direct to the clamshell,
that's going directly to Krogeror you know, you name the
retailer.
We've got a citrus operation inSouth Central Florida.
It's a specialty tangerine thatbasically it's a unique variety
(12:01):
that sold out every box thelast couple of years that it's
been available.
It also has some resistance togreening.
That's a situation where we'reproducing a crop that goes
directly to the retailer andthere to the consumer, but that
is not what Will's doing.
I mean Will is runningagro-tourism mixed with ag
retail and a very diversifiedoperation.
(12:24):
Not saying we wouldn't have aclient that would look at that,
but I think the concerns overour ability to replicate the
management of that if Will andhis daughter say no, we're not
doing it anymore, that couldbecome a challenge.
Now on the sustainability front,we have a client and I've not
(12:44):
named them because it's aprivate deal but we have a
client that wants to buy farmsfor lack of a better term, I
mean that is a very general term, but any farm operation that is
doing things in an ESGsustainable way, they don't
really define exactly whatthey're looking for, outside of
(13:05):
the fact that they say we wantto do it better than those
operators in the generalvicinity around the asset that
we're buying.
So that may involve cover crops, they may involve organic, that
may involve reduced tip lids orno tip lids.
That could be a whole host ofthings that are viewed as
sustainable or ESG interesting.
So we do have clients lookingfor that aspect of what Will is
(13:28):
doing.
So I wouldn't rule it out.
Probably $5 million is going tobe your minimum, just because
we don't have any other assetsin that part of the state.
If it were in Indiana, Illinois, places where we've got assets
(13:50):
already, then we could go downto $1 million.
So we've got some latitude togo down to smaller, bite-sized
pieces.
But I think the locally grownagro-tourism, agro-retail that
Will has, that's going to be amanagement structure.
You're going to have a lot ofemployees.
(14:11):
Honestly, our clients aren'tsuper excited about employees.
We do employ all the labor onthose blueberry farms and we do
it through an organization thatbrings in the seasonal labor to
harvest the blueberries for us.
So we do have instances wherewe're directly operating the
(14:31):
farm, taking all the product asyour return and paying all the
expenses, including labor, toget it done.
But we've got to have an onsitemanager that manages every
detail day to day.
US agriculture doesn't have theexpertise to do that, so we're
going to need somebody like Willand or his daughters or that
team that can come in and managethat operation.
(14:52):
If they're not there and Ithink suspicion that's going to
be really hard to replicate.
Will Harris (15:00):
I agree with everything Howard says and I
think there's an even greaterpoint that he didn't mention,
and I think the biggest issue isI've got some debt but I've got
3 times as much equity as I'vegot debt and I'm satisfied with
(15:22):
a very, very low return on myinvestment, not just because of
lifestyle.
That's great, I enjoy thelifestyle.
But, my farm has gone from a 1%organic model to over 5%
organic model.
That's excellent.
In the last 20 years and Ican't do it as fast as I read
people do it took me 20 yearsand I've been doing it for God's
(15:45):
blessing.
But, and if I I got friends whoare land appraises and they
appraise my land, they say, well, if it's half percent, 5%,
we're going to appraise it forthe same thing.
And they do that's fine.
The productivity of my land at5% is exponentially greater than
the production capacity of myneighbor's land at a half a
(16:09):
percent and that means a lot tome.
You're building my land up doesnot show up on my financial
statement.
If I was working it for aninvestor, you might, but the
ones I know wouldn't give memuch credit for that.
But for this family farm thatwe own, it has exponential value
(16:32):
to me.
So, if I can operate the son ofa bitch at break even and
increase that kind of value,this is a good deal for us.
Colter DeVries (16:43):
Don, I want you to comment on that, because he
brought, Will already brought upmy next question.
Isn't there long-term value inwhat he's doing?
So if you're, Howard talksabout a 10- year IRR, Don, and
if your hurdle rate is 7%,wouldn't that organic matter and
(17:03):
the sustainability, resiliencyof what Will is doing?
Wouldn't that add value in thelong term?
Or are we still kind of in thisposition where ESG
sustainability metrics, ithasn't been proven out to add
value, that people are taking adiscount to pursue green
(17:27):
investments?
Don Colter (17:28):
Yeah, I would agree .
I think one of the things thattraditional investment hedge
funds, equity funds, is theirtimeline.
I think they can be a littlebit short-sighted in that and,
as Will mentioned, developingthe organic matter and improving
(17:53):
the soil of that nature is avery long-term process.
So how do you measure it?
What's the value of it?
I know you understand you'vegot the metrics of it, but
trying to translate that into avalue and represent that and
(18:13):
communicate that to a pensionfund and whatnot can be
difficult.
Personally, I think it's gothuge value.
I'm a huge proponent of thatregenerative style of
agriculture all regenerativeagriculture, depending on what
level an operator is doing.
(18:34):
So I think it's not new, butnew enough and not measured
enough for a traditional fund.
At many times I think there's alot more light being shed on
the needs for regenerative ag,especially with ESG mandates In
(18:57):
the US.
In the EU it's become a lotmore focused on with their SFDR
mandates.
In the EU it's really builtinto their reporting
requirements and I don't thinkthe US has quite got there yet.
Will Harris (19:15):
I wish you'd filled the news whole words.
I don't know what to end themdown.
I can't end you.
I knew that one.
I knew you, all of us, y'allspeaking acronyms.
I have no idea what you'retalking about, but I will say
that, and I certainly don't mean.
I want to be very respectful tothis group here, but you all
(19:37):
take a very linear approach toagriculture.
You're talking about five years, 10 years, whatever.
The number is very linear and Ithink that's wrong.
I think that agriculture has aliving system that's very
cyclical, not linear, and Ithink that's the reason I'm
(19:59):
satisfied with almost no returnon my investment.
As long as I know, I'mexponentially building the
production capacity of my farm.
We've owned it for 160 orwhatever number it is.
You know my children may sellit.
If they do, they'll sell it andit will be sold.
I'll be dead.
But, what I'm doing is puttingthem in a position so they can't
(20:24):
own it for another 160 years ifthey want to, and I realize
that's not marketable in thesituation that y'all are in.
To operate this in a cyclicalmodel, which is the way I think
that a natural system reallyneeds to be operated.
You can't look at it as anannual return or decade, or
(20:50):
maybe not even generational.
It's got to be perpetual.
Colter DeVries (20:54):
Howard, aren't we seeing more of these
institutional owners turn intoessentially permanent capital,
this protection of principle andgranted, I think Will might be
a little fresher at even talkingabout these types of assets as
balance sheet assets, but we'regoing to today.
Are they not becoming morepermanent capital?
(21:18):
And it's just this excellentprotection of principle.
And maybe is that message notbeing marketed more effectively
that hey, if you take a smalldiscount on the annual yield,
we're going to actually improvethe principle in the long term?
Am I way off in that thinking,Howard?
Will Harris (21:38):
Well, you're wrong.
You say small discount.
I think you'd be a hugediscount.
Howard Halderman (21:43):
Will's not wrong.
We do have to look atperformance metrics, and so
we've got to really try tocreate a 10-year internal rate
of return that hits the marksthat they want, and if they're
at 68% internal rate of return,then that's probably a
transaction that we can look athonestly.
(22:03):
I think how it?
But your right culture is thatthere are more and more groups
out there that want to investand they do want that long-term
sustainable theme here.
It would work well with anoperator like Will and this is
where we've done it with theseother producers I mentioned
earlier is that we don't operatetheir core business, but what
we do is we come in and Willsays, hey, I want to buy this
(22:26):
1,000 acres next to me and Iwant to do the same thing on
that 1,000 that I've done on myown farm, but I don't want to
put my capital into it or itcan't whatever.
Then, mr Investor, could youstep in and be the capital
source for?
That.
And I'm going to operate that1,000 acres under my system,
which is a very sustainable,long-term cyclical, as Will was
(22:48):
describing, a very holisticapproach to soil enhancement and
making that farm better 10years down the road than what it
is today.
Then we can build the modelfrom that and by leasing that to
his operation and he may notwant to go to $30 million, but
it could help him grow hisoperation in some fashion and
(23:10):
not have the capital tied up inthe land resource.
And so that's what we're doingin many instances, whether it's
apples in Washington State orthe oranges down in Florida
we're going in as a partner withan existing operation and
providing a capital source forthem to expand and grow their
operation, and then our owner,our client, receives the
(23:32):
financial rewards and thebenefits and the returns to that
land and that investment intrees or whatever.
So, that's probably a more of away to look at it than us
coming in with an investment inthe whole operation.
Because, as I said earlier, totry to replicate that management
team and oversee thatmanagement team, I think Will's
got a unique situation there.
(23:53):
These obviously are verysuccessful, so, but I think
being a part of that andproviding capital as part of
that would be something that wedo on a regular basis.
Will Harris (24:06):
I bought every farm that's sold for the last 20
years that touched mine.
I bought it and I have reachedthe point I can't keep doing
that and there will be otherfarms for sale.
This country down here was in250 acre farms or so when I was
(24:26):
growing up and those people haveleft and consolidated.
Now, they're just a handful ofbigger farms, most of them
industrial peanut, cotton, corn,root crop farms, and most of
them don't own a lot of land.
They lease land.
So I've been buying land andI'm very pleased that I did.
The land I bought escalated invalue significantly over the
(24:51):
last 10, 15, 20 years and I'veincreased the organic amount of
the productivity of it and putit in grass and fenced it,
cross- fenced it, chopped it upinto 150 something, which is
very advantage.
(25:11):
We made the family decisionrecently that some of these
other little farms will beselling in the next decade or so
and we probably can't buy them.
I just don't want to incur therisk at the low return that we
generate.
I don't want to put my familyat risk.
(25:32):
We have some debt now, but it'spretty manageable.
I just don't trust a big land-buying outfit.
I mean I can't stop them frombuying it.
But if they did, it's hard forme to trust that they would
allow me to improve the land andshare in that benefit, and I
(25:54):
can't afford to pay them whatland leases for if I'm going to
improve it.
You got to decide what you want.
You want the organic amount togo from half a cent to five a
cent or do you want to collect100 or like a rent?
You fellas may be different.
I hope you are.
I hope you are.
God bless you.
But everybody I've ever talkedto it was about the return they
(26:16):
can get on the land.
You know they get in the mostmoney they can and the most
money they can get is going forsomebody that's going to get the
hell out of the land.
And that's what I got to half apercent for them, to your
organic amount.
Colter DeVries (26:32):
I suspect that what Will just said you've heard
before from some of yourstrategic partners.
You've heard before from someof the competition.
I understand that when you goout looking at a farm, it's not
other institutions that you'rebidding against.
For the most part, it's theneighboring farm.
(26:52):
How do you, Don?
How do you address the concernsWill had just mentioned about?
Well, maybe I am backable.
Maybe it does takeinstitutional financing to
expand.
How do you address?
Because you've heard, I'm sureyou've heard this before from
other farmers.
Don Colter (27:12):
I have.
You know, when you're going outlooking at properties to
acquire.
Maybe it's unique in my area uphere in the Pacific Northwest.
A lot of the larger qualityoperations are being sought
after by institutionals or someof the large corporate entities.
(27:35):
There's not a lot of smallerindividual family farm
corporations that are gettingthem.
So, that's one of the thingsthat are unique up in this part
of the world.
But you're right, you do hearthat.
You know I'm going to improvethe soil but that takes time,
(27:56):
that takes money and can weshare in that?
Yeah, that's.
It's again a difficultdiscussion sometimes with the
investors because they've gottheir investment horizons and
return requirements to meet fortheir pension clients, for
(28:19):
example.
Colter DeVries (28:20):
Howard, how do you allocate or deal with this
vested interest vesting andmaking sure that the tenant is
operating to the best of thesoil's ability?
And we haven't even talkedabout community, and no,
community is a big piece aboutwhat Will does, but we're
(28:40):
talking numbers on a balancesheet.
So vested interest sharing,risk sharing, returns, Howard,
how do you approach that?
Howard Halderman (28:50):
When we look at a opportunity, we're going to
first of all buy something andit isn't so much about the piece
of property as it is about theoperator, and the operator has
to be able to bring value andprobably is going to be a little
special in each marketplace andthen we want to invest
(29:13):
alongside them.
So you're partnering with them.
I mean that as a partnership,we're not seeking the highest
rent, we're seeking a replicablerent, so it's a rent that we
could get from five othertenants.
That way we know worst casescenario this guy gets hit by a
Mack truck.
We've got somebody else thatcould step in and pay that kind
of lease rate.
It isn't so unique that you'restuck.
(29:36):
We took our investors on afield trip in August and we do
this every other year.
We went to Northern Illinoisand we went to a partnership
that we have with this familyfarm operation.
It's two brothers and theirfather that they have solar,
they have wind, they have goneinto cover crops and no till in
(29:58):
Northern Illinois.
We're partnering with them andbuying land.
Basically, they're saying, hey,we can't put our capital in land
, Halderman, you've got thisclient out of the EU that's
willing to take a little lowerreturn because they want to
enhance the value of the soillong term, and so we're then
basically acquiring pieces ofland for them that they're going
(30:19):
to operate in this sustainablefashion.
We certified a leading harvest,so leading harvest is a
certification method that hasbeen kind of accepted by a lot
of institutional asset managers,and we certify all of our
properties to that, whichbasically means that you're
doing things in some part of anESG compliant method.
(30:39):
So, Will knows what that is.
That's environmental, socialand governance practices that
are sustainable long termsustainable in all those three
categories.
So that's the way we do it.
But we really look to try tobuild a long- term partnership,
and if you're going to build apartnership with a tenant for 10
years, 20 years, which is theinvestment horizon a lot of
(31:00):
these investors have they haveto make money too.
So, Colter, we're not doingthis and saying, hey, we want
the highest rent possible and wereally don't care what your
side of the equation looks like.
That's false.
We want to have them beprofitable, because if they're
profitable, they're going toreinvest in that property and
likewise we will invest in themand it becomes a great
(31:21):
relationship and they'll bringus more deals over time and it
just grows that overallportfolio and will hit the marks
that our clients are lookingfor.
Colter DeVries (31:30):
Will.
How do you feel aboutcertifications, oh?
Will Harris (31:34):
You know, I'm just burned out on them.
I mean, I'm notanti-certifications.
I've had just about all of themyou can have.
I don't think you need many Ihadn't had at some point.
Today, we're certified by planto market the slavery deal.
American Grassville Associationcertified humane properties and
(31:57):
mobiles.
I used to be certified organic.
I got pissed off when theyallowed hot house tomatoes to be
certified organic.
I've had many of them.
I don't hate them, but they'reall.
This is another thing I feelvery strongly about is, I went
(32:20):
to the University of Georgia.
I majored in animal scienceundergrad in the 1970s.
The courses were taught byprofessors that were from
Montana and Massachusetts andMaine.
They could teach anywherebecause it was so repostant.
(32:41):
I very strongly believe thatevery ecosystem has rules that
you go by.
The laws of nature, the cyclesof nature, the energy cycle,
mineral cycle, carbon cycle,water cycle, dot dot dot.
We name a bunch of them, areuniversal, but the application
(33:06):
in the coastal plains of Georgiaversus the Rocky Mountains,
versus the Great Plains versusNew England is different 30
miles from here.
I'm disturbed by the waycertification programs are
designed to work anywhere in theworld.
(33:30):
I don't hate them, I just sortof burned out on them.
I got a bunch of them.
We still got a bunch of them.
They're important to mydaughters.
They're not important to me.
I don't like them, but they'rejust so.
I don't know what the word is.
They just apply to everywhere.
Colter DeVries (33:51):
So they really apply to nowhere.
Homogenized to.
Don, let's get philosophical.
You mentioned that you likeregenerative agriculture.
You're an old cowboy yourself.
Really, you're a cowboy in asuit.
Today.
It looks like you're going togo hunting after this.
But is there a future where westart seeing more UBS, UBC,
(34:21):
craft investing in regenerativeagriculture with livestock?
Don Colter (34:26):
I think there is an interest in regenerative ag and
I think one of the things itgoes much to the same as organic
and the others.
What's regenerative to me isprobably very different to Will,
to Howard, to you, so it's muchto the same as what's a GMO.
(34:49):
I hear people get on thesoapbox anti-GMO.
Howard Halderman (34:54):
What is it?
Don Colter (34:55):
Is that selective breeding?
Is that gene splicing?
It's all genetically modified.
So my backup into just ageneral category of regenerative
agriculture I think there'sgoing to be more institutionals
involved in it.
There's one company, VEDA.
(35:18):
A former colleague of mineworks there.
They're kind of a start-up butthey're really trying to work
with tenants on regenerativepractices and for them that
might just be cover crops,precision agriculture, to
selectively spray, toselectively apply fertilizer, so
(35:42):
they're trying to limit thatinput and regenerate and build
soil health.
So, like I said, if I step backjust to my old cowboy roots, my
dad do I say take care of theground, the ground takes care of
you.
It's fairly simple.
So how do you blend that intoinstitutionals?
(36:04):
I, Howard, hit on it.
You have long-termrelationships with quality
tenants that, as is one of myformer colleagues, do the right
thing when nobody's looking.
So it's harder to measure, butthere's interest in it and I
think if the managers, fundmanagers or those of us who've
(36:30):
been involved, can convey thatmessage as well as deliver
whatever a decent return that aclient might need, I think that
is a critical part into thechain as well, Howard you've had
those discussions, I'm sure.
Colter DeVries (36:51):
What is the challenge with the clients that
approach you and say we want ESG, we want green, we want
regenerative, but we also want a4% annual yield.
Where's the friction there?
How have those conversationsbeen going?
Ad (37:08):
Well from our standpoint, what we've always done at US
agriculture is.
Howard Halderman (37:13):
I believe in the public, transparency, and
we're at a stage where we don'thave to take the next dollar,
and so our answer has alwaysbeen I can tell you I was at a
meeting in New York City atGlobal Ag Investing Conference,
and I had these two investorssit across the table from me and
they wanted to hear what wecould do, and so I started
(37:34):
talking to them about what wecan do and how returns are
somewhere in that 6% to 8%long-term internal rate of
return and they said, well, wewant 15%.
I said, well, that's not thekind of agriculture that we do.
And they said, oh, I said so, Iguess we're done here, and the
conversation ended in fiveminutes because it so.
(37:55):
That's the approach that we'regoing to take.
If somebody came to me and said, well, we want this ESG
compliant, leading harvestcompliant, you know, whatever
certifications Will doesn't carefor.
Honestly, it's a lot of work onour end too.
So I completely get hisfrustration.
And if you're designing one ofthose, it has to be general,
because it has to fit a thousanddifferent operations.
(38:17):
It can't be just, you know,specific to one region or one
spot, because then you don'thave enough scale to justify.
So it is frustrating because itis so general and you're
answering questions about cropsthat don't apply to you, and so
I get all that.
But if we have a client thatcomes and says we want that, all
right, we can do it.
(38:38):
But here's reality it's probablygoing to cost you a little more
because we have more managementthat we have to do and you make
sacrifice some annual yield forthat cash yield.
But we believe long term you'regoing to end up with a better
farm, and so the onus on us asthe manager then is how can we
(39:00):
document what Will's documentingand show value in that?
Because I would argue, ifWill's going to a 5% organic
matter and he's telling me hisproduction, annual production,
is better than all of hisneighbors who are at half
percent, we can monetize that.
I can sell not that Will wantsto sell his farm, but I can sell
that.
Because if he's telling me whyI can grow 220 bushel corn on
(39:24):
half the water they're using orhalf the fertility they're using
because my organic matter isbetter, then there's got to be a
.
I can operate that on a customhire basis and make a higher
rate of return than what I canon a normalized custom lease.
So that's the answer I wouldgive is how can we formulate a
(39:46):
partnership that capitalizes onmaking that a better farm over
10 years, and how do wetranslate that to real value
when the appraiser comes out toappraise it?
And granted, we do 1200appraisals a year at Halderman,
so I know how the appraisal gameworks and you have to use
comparable sales.
Well, how can I show thatappraiser that this is certified
(40:08):
to leading harvest and it's gota better organic matter than
all these comps you're using?
And therefore that translatesto a higher APH, which, at the
end of the day, is higher farmincome.
Will Harris (40:20):
I'll tell you what I'm going to start.
I bought a little farm out hereseveral years ago and I had
borrowed money from the banksent an appraiser that I didn't
know and so often theseappraisals are kids, but this
guy was about my age and Ididn't send anybody with him.
I took him myself because Ijust wanted to and I showed it
(40:43):
to him.
We have a nice in-depthconversation about farming and
land management and it was good.
I thought he was just on cuewith his comments and I said I
want to show you something.
So I took him to another farmthat I had bought, that we had
really managed well, I think,and the organic model was up
(41:06):
north of 5% and it was rightbeside the farm I don't own.
In fact the cousin of mine ownsit.
There was a half a percent andI said these two farms are about
the same size.
They both got a well, both onthe road.
How would you appraise it?
And I said no.
But before he said out some,this was 5% organic matter.
(41:27):
That was half a percent.
He said I'll appraise them forthe same thing.
I said you would?
He said yeah.
I said no, I'm ashamed.
He said that to me heunderstood, but the rules that
he felt compelled to play by heappraise those farms.
At the same time, I can tellyou that the farm that we had
(41:49):
improved will yieldsignificantly better, whether
it's grass or grain or grapefruits, don't matter.
Howard Halderman (41:59):
Well, here's the thing you're building up
your organic matter.
It's going to use less water,right?
Because you've water-holdingmore capacity in that organic
matter.
So not only is it going to havean enhanced yield, but your
cost if you're irrigating isgoing to be less.
So a lot of regions around thecountry, water is extremely
(42:20):
valuable.
And how can you cut that waterusage?
I can monetize, which anappraiser needs to use an income
approach.
If he's purely going off salescomparison, then he might
struggle to come up withadditional value for 5% of the
antimatter.
But on an income approach,you're using the same cap rate
(42:42):
but you ought to have a higherincome because your farm
generates a higher cash return.
Will Harris (42:48):
Yeah, but now we're on the Floridian aquifer, yeah
it's the best aquifer in thecountry and water is cheap, with
water costs nothing other thanthe energy cost of getting out
to ground and all the crop.
Yeah, and I can tell you so theresearch shows, and I believe,
(43:09):
that 1% organic matter willabsorb a 1-inch rainfall.
It's 27,000 gallons a acre andI believe that I've just watched
enough that I not that it comesin 10 minutes, but if it's
gradual, yeah, just so happenstoday we got a 5-inch rainfall,
that's over a 36-hour period.
(43:29):
We just got one.
That's the reason I'm in here.
I could take you to where myland.
Very little water was runningoff and what was running off was
clear.
Off an adjacent farm.
Four and a half of the fiveinches ran off because it's only
(43:50):
half an organic matter it's notgoing to absorb, and the land
was red with clay subsoil.
The water was red.
So you know, there's no doubt.
There's no doubt.
Well, everything I'm tellingyou is just spot on.
I can show it to you.
(44:11):
But in this farming system itjust doesn't matter much because
that guy doesn't own that land,he doesn't care, he's pumping
water.
That's cheap, cheap water.
You can pump water todaycheaper than you can build
organic matter to absorb rain,and it's just the economics.
Howard Halderman (44:31):
In your area, but that is not true.
Will Harris (44:35):
And today it won't always be true.
It's true today.
Right, yeah, good point.
Colter DeVries (44:41):
What I hear somewhat, Don, is are we lacking
in being able to monetize someof these public goods?
The soil runoff, drought,resiliency, the reduction of
pesticides, herbicides you know,Will was talking about his
neighbor's erosion that's, andWill's management is essentially
(45:07):
a public good.
Are we lacking ways that maybeit's an incentive scheme on
behalf of the institutions?
Are we lacking ways to monetizethat public good that Will
provides?
Don Colter (45:21):
I think it's either a lack of monetization or the
lack of particular investors toaccept a lower return to do
these practices.
So, yeah, I think there wouldbe.
If there's a way to monetizethem better, I think that would
definitely help.
You know, you got to have thefeedback loop on your
(45:44):
investments for things and Idon't know what that because.
Will Harris (45:48):
But I can tell you this I don't buy the 80 miles
from the Gulf of Mexico and theGulf of this, that part of the
Gulf of Mexico, used to be oneof the best oystering fisheries
in the world and now it's a bigold dead zone.
They banned oystering and allthat di-nitroaniline and
oligantil phosphate andphosphate and nitrogen that we I
(46:12):
was doing it too put on my landand my neighbors put on their
land, went down Spring Creek tothe Chattahoochee River, to the
Gulf of Mexico and did thatdamage.
And I was part of that.
They were during the era thatI'm not anymore, but during the
era that that happened I wasputting out chemical fertilizers
(46:34):
on the best sides as much asanybody else, probably a little
more than my neighbors were.
But that's a cost that we allbear, and I can name a lot more
of them if you want me to, andso I mean what we're doing is so
wrong and so uncorrectable thatI don't think we see it done in
(46:55):
my lifetime.
I think what we're doing hereis one of the solutions for
these problems, but it'sexpensive and I don't think I'm
not real optimistic about it.
You have to tell my familywe're doing what we're doing
here for us.
We're no longer part of thisgreat dream of farming becoming
(47:22):
deindustrialized and changing.
Maybe it will, probably won't,certainly won't during my
lifetime, probably won't duringtheir lifetime, may never happen
.
But it's okay because we'rebuilding a tremendous amount of
resilience into this land and wehave built a market for $25
million worth of product thatthere are consumers that will
(47:43):
pay enough for it to allow us todo it, and the land is getting
better and better.
And I don't know this any.
I don't know how that looks.
I don't know how people saywell, you have 5.5% organic
model.
You can't get to 10, correct,but I can be twice as deep, you
(48:07):
can be.
Instead of four inches at 5%,it can be eight inches at 5% not
during my lifetime at somepoint.
So doing the right things forsomething as perpetual as the
land is a right freaking thingto do.
And if you expect to trade it,you know when I buy a car, I
(48:30):
don't buy the nicest automobilein the road and I don't spend
incredible amounts of money inmaintaining it because it's a
wearied.
How many non-depreciatingassets are there?
Land?
Very few.
Precious jewels, preciousmetals, maybe art I don't
exactly believe it, but maybe,but there aren't many
(48:52):
non-depreciating assets and ofthe non-depreciating assets, the
only one you can do somethingwith is land, and the only one
that you can improve is degradedland.
So if I don't see how a personwith a family that well, if
(49:16):
you're 20 years old and you'rejust gonna be doing this until
you're 60, don't do that.
Don't do that.
But if it's going to be moreperpetual, it's the best
investment you can make.
You know, again, we've got alot of equity.
We pretty good at doing whatwe're doing.
(49:36):
We built a pretty good business, but there's not a lot of
return and I'm fine with that.
Now, I'm fine with it.
If it was, if it was spendingoff cash, we'd be paying taxes
on it and probably pissing itaway.
So what's happening?
You know it's going back intothe improvement of this
perpetual asset.
That's exactly where I'm going.
Colter DeVries (49:58):
Howard, you were gonna chime in after Don.
What were you gonna say?
Howard Halderman (50:02):
Well, I think so.
I did two seven hours today andI did four last week, and one
of the slides that I show inthose seven hours we had two
auctions November 29th of 2022.
So on the same day we soldthese two farms at auction and
they were about 50 to 60 milesof Carter Creek each other.
In Indiana it's prettyconsistent.
(50:24):
Across Northern Indiana it'scorn and soybean land.
There's a little bit oflocation difference, I'll give
you that, but not a ton betweenthese two farms.
The soil productivity index, theinherent soils that are there
the farm in Cass County was 148,though Delaware County was 145.
Very similar productivityindexes.
(50:46):
The range in Indiana is like188 on the best and down to
below 100 on the worst.
So very average farms,soil-wise for the state.
Those two farms sold for 100%different values.
The Delaware County farm brings15,000 an acre.
It had the reputation like WillHarris's farm would have.
(51:08):
It had the reputation as thebest farm in the county.
So the farm in Cass County hada reputation as a very poorly
managed farm, not taken care of.
It brought 7,500 an acre,exactly one half the value of
the other farm.
Now, some of that is made up inlocation.
(51:29):
I'll give you that because thispart of Cass County is not a
great location and the DelawareCounty is probably a little
better for location, but not allof it.
A lot of it, I know, had to dowith the fact that that farm in
Delaware County had bettermanagement.
They cleaned up their fencerows, they had better weed
control, they had betterfertility programs.
I don't know whether they weresustainable or not, but the
(51:52):
community viewed that as gosh.
That's a really well-maintainedfarm, well-maintained asset I'm
buying.
I know when I've sold hundredsof farms at auction, I get the
comment when you hear somebodycome in and they say, well,
that's a wet farm that's neverhad a fertilizer truck across it
, those are negativereputational comments.
That brings less value Then if.
(52:13):
I had the soil test from WillHarris's farm and I could show
5% organic matter and I couldshow top-notch fertility and I
could show top-notch productionyields.
If I had that to market as abroker, that's going to bring
more value.
I truly believe it's there andI know I'm disappointed that the
appraiser gave Will that kindof answer.
Because you can adjust forquality.
(52:35):
That's allowed for an appraiserto adjust for.
You can adjust for time, youcan adjust for location, you can
adjust for quality and that'swhat his answer should have been
.
Yeah, you know that 5% reallyought to be better than 1.5% and
I can appraise those for twodifferent numbers and I can
justify it.
I tell all my appraisers and wedid 1,200 appraisals last year,
(52:56):
so we're not small in thisbusiness I tell them all, when
you do an appraisal you betterbe able to sit on the stand and
defend it.
You know, very seldom will weever go to court.
You know it's not.
It'd be a divorce case orsomething like that.
So most of the time you're doingit for a loan-based collateral.
But if you always mentallythink about, I can defend it.
Well, I know I can defend WillHarris' quality adjustment
(53:19):
because I know additionalorganic matter can absorb more
rainfall, I know it's gonna holdmore rainfall, I know it's
gonna hold more fertility andthe fertility is gonna be more
available to the crop, whichtranslates to a better yield.
And a better yield at the endof the day is gonna generate
more farm income.
And a farm is worth.
What it produces is income.
It's an income-producing asset,so I think you could easily
(53:40):
justify a higher value.
I don't know I'm not giving youan exact answer as to what
that's gonna be, but it's there.
I think it's provable.
And that example from you know15 months ago is one of the
examples I use in those seminarsto say here's why you take care
of your farm.
Colter DeVries (53:56):
Well, I know I told you guys an hour and a half
, but I'm comfortable with thegood hour we've done.
This has been excellent for meand I hope you've enjoyed your
time as well.
I do wanna have some outros,though, so taking us away.
Final thoughts.
Will Don Howard, kind of aslet's go full circle, do we see
a future for the more scalableor replicable or repeatable
(54:22):
institutions looking to getinvolved with what Will is doing
?
You're shaking your head, noWill.
Why is that?
Will Harris (54:29):
Well, it's just, you know, I think that the idea
that land is a perpetual assethas been ignored or taken for
granted or considered to be, youknow, more like a tract or a
barn.
This is where you can get outof it for this period of time.
(54:50):
And I think that, while theseguys made me understand, I seem
to, and I credit you being ableto understand increasingly value
by increasing the micro-gilllife organic amount of nutrient
density dot, dot, dot.
Most people don't.
And it's hard for you know, theland that I have bought and
(55:15):
paid for paying for.
You know, I'm willing tooperate on a super low return
because I think I'm buildingsomething for myself.
If I were building it forsomeone else, I'm not sure how
we divide that benefit.
I don't know what's fair.
You know, I knew I shouldn'tget it all, but he shouldn't
(55:38):
either.
And I don't know, and it's asoft asset valuation.
I mean I can't tell you I'mgoing to increase your land by a
half percent every year for thenext 10 years or whatever.
I don't know that.
I know I can improve it, I'msure you've done it, but the
guarantees would be difficult.
(55:59):
So, I, you know, I just don'tthink that most investors I mean
, I know some rich people andthey're good folks, but I don't
think they have this depth ofunderstanding and I don't think
that they view the land as aperpetual asset.
And if they do, they're notgoing to own it in perpetuity.
Colter DeVries (56:21):
Well, that was.
That was kind of doom and gloom.
That wasn't the outro I waslooking for, Will, I'm a dumb
and doom and gloom guy we'recalled.
Will Harris (56:28):
I've lived on here a long time.
I'll show you my scars.
Colter DeVries (56:35):
I want to hear a little bit more about
"undefined bold return to givinga damn your book White Oak
Pastures, as we take it out andhand it off to Don and Howard
real quick.
Will Harris (56:45):
Yeah.
So I you know I didn't.
I didn't think I could write abook.
And now I know I couldn't writea book.
But we were contacted by RandomHouse We've got three names,
big publishing company and theywanted me to.
They just wanted me to write abook.
(57:06):
They kind of recruiting and Itold them I couldn't write a
book, I don't even read booksand they ultimately hired a
woman to write the book who Ikind of fell in love with.
She designed me, just one of mydaughters, a little sweetheart.
We spent I probably got about50 cents an hour out of my time
in writing the book, but it Imean I'm not the judge of how it
(57:31):
turned out, but it's aboutthese things we're talking about
.
It's about, to great extentit's about my relationship, my
family's relationship with thisland.
Colter DeVries (57:43):
Well, thank you and Don, what's your key
takeaways?
What's your outro leading usout?
Don Colter (57:49):
You know I appreciate Will sharing his
story.
I mean I just on a personallevel and all of what you've
done and wish more people caredlike you do for the ground.
I think that in itself wouldhelp a lot.
You know my personal experienceof you know take care of the
(58:12):
ground, the ground takes care ofyou.
Wish more people understoodthat.
Like you said, investment wise.
I think it's there's moreincentive to do it, but I think
that needs to be more.
And somehow have, like you said, have people give a damn more
than what's my IRR, what's myannual return?
(58:33):
How do you monetize that andthen set it without making it a
regulatory thing?
I think you start getting intothose type of dictates, mandates
, and then you run the risk ofgreenwashing and people trying
to end run a system.
So how do we do that to makeour investors and just our
(58:55):
general society care about thesoil?
Cause the soil is, like yousaid, creating the dead zone in
the Gulf of Mexico.
It's got the runoff in thevarious places.
So how do we incent people tocare more to make it more of an
investment vehicle?
I don't know if I answered anyquestions, but that's my
(59:17):
thoughts.
Colter DeVries (59:18):
Well, my belief is you incentivize people, and
people are inherentlyincentivized by sex, money,
power and control.
Will Harris (59:27):
You can reach a point in sex and I was making
new.
That used to be.
Colter DeVries (59:32):
Howard, what's your key takeaway?
And an outro here.
Howard Halderman (59:36):
Well, I am optimistic because I sit with an
.
We have 600 landowners atHolder and every two years we
have a landowner field day.
And for the last I don't knowsix or seven of those meetings,
I've had some portion of the dayspent on regenerative,
sustainable practices.
Sometimes it was tile drainage,sometimes it was cover crop,
(59:57):
sometimes it was reduced hillage.
It was a focus, in fact.
We talked about ehabitat andshowed them beehives on one
property with what we took themout.
I think out of those clients 600clients, there's gonna be half
that would say, if I could havemy farm farmed that way, I would
prefer that.
Are they willing to give upyield for that?
(01:00:19):
I think of our typical farmmanagement client I think they
would.
They're not all about the end,all be, all yield.
So that transition over to USagriculture, which is
institutional asset management.
There are some that they've gota set return hurdle they want
to achieve, but I see more andmore of those groups coming
(01:00:40):
today culture that say yes, butwe see the longterm view and
these are longterm owners.
You know I don't have any hotmoney.
I tell people if you want today trade agriculture, don't
talk to me.
That's not.
You know this is a 10, 20 typeof year investment and so we're
gonna try to earn you a goodannual return but also improve
(01:01:04):
the value of the farm and over a10 to 20 year time period.
That's where we're gonna end up,is it with a better property?
We can't control the overallmarket.
We can certainly make ourproperty the best it can be in
that region and I think there'smore and more incentive out
there.
People understand the hypoxiazone and what has been created.
They don't want that, you know.
(01:01:26):
I don't think they're all aboutthem.
The end all be all dollar.
I think there's a hybrid therethat we can arrive at, and I see
more and more groups willing tosacrifice a little bit of yield
on an annual basis for thatlong-term goal.
So I'm optimistic that we'regetting there.
It isn't overnight.
It isn't overnight for Will tocreate 5% organic matter either,
(01:01:48):
and so it's each little stepthat we can take, and we can
take another step this year, andanother step the next year, and
we'll get there eventually.
Colter DeVries (01:01:56):
Well, gentlemen, I was trying something new here
with this forum style and Ihope it was worth your time.
Thank you guys for coming on.
Have a good week.
We have you all.
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